This workout asks us to calculate EBITDA. You may wish to pause the recording and have a go on your own first Provided to us is an income statement and underneath that a cash flow statement exert and underneath that some footnotes So in trying to calculate EBITDA, I'll start in the middle of the income statement, looking for operating profit and we can see it right there, 3371.2. I then look within the income statement for any non-recurring items that should be added back and I can't see any immediately above We now go into the footnotes and one stands out very quickly, the "loss on sale of subsidiary (included in SG&A)" of 35 So you can see, I've started my answer of operating profit and then added back the loss on sale of subsidiary Were there any other items that I think should be added back? Well within the PP&E and intangible items footnote I can see there is an impairment expense. That expense is 9 That's clearly a one off, it happened just once this year. It's an extraordinary write down of value I don't think it's going to happen again, so we're going to add that back In getting to EBIT as well So my EBIT calculation is 3415.2 And that is the sum of the three items above: operating profit, loss on sale of subsidiary and the impairment expense I need to go from EBIT to EBITDA and I'm very very tempted to look into the cash flow statement In the cash flow statement I can see there is a depreciation and amortization line of 111 It's very very tempting to just add that back. Fantastic, I'll have EBITDA However we had an impairment expense and whenever I have an impairment expense I get worried I get worried, should that line depreciation and amortization really say, depreciation, amortization and impairments? Does that 111 already include the impairments? Let's go down to the PP&E and intangibles footnotes We've got depreciation here of 58 and amortization expense of 44 And we've also got the impairment of 9 If I add those three together, that comes to 111 And that is exactly the same as the depreciation and amortization line in the cash flow statement That means impairment is secretly being included in the cash flow statement (in the depreciation and amortization line) So if I add back the 111 If I add that on to my EBIT to get to EBITDA, I will have included the impairment twice I would have included it here and I will have included it within D and A That means I must not do that, so I'm going to include depreciation on its own And I'm going to include amortization on its own and I don't put through the impairment expense again So EBIT plus depreciation, plus amortization now gets me to my EBITDA figure of 3,517.2