What might be added back to EBITDA to assess a company's financial health?

When assessing a company's financial health through EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), it is important to add back costs that are considered non-recurring or extraordinary. Legal expenses often fall into this category, as they can vary significantly from one period to another and may include costs related to lawsuits, settlements, or regulatory matters that are not part of the company's normal operations.

By adding back legal expenses to EBITDA, analysts can provide a clearer picture of the ongoing operational earnings of the company, excluding the impact of these one-time or irregular costs. This allows investors and stakeholders to better assess the core profitability and performance of the business without the distortion caused by atypical legal costs.

In contrast, recurring operational expenses, routine maintenance costs, and monthly utility costs are considered regular business expenses and are typically part of the normal EBITDA calculation. They represent the ongoing costs of running the business and do not provide the same insights into extraordinary financial events that legal expenses might. Thus, adding back legal expenses provides a means to evaluate the company's actual performance more accurately.