I first heard of EBITDAC in mid-April when a business school classmate sent a meme to a WhatsApp group showing a new term that we definitely hadn’t learned in Corporate Finance classes: Earnings Before Interest, Tax, Depreciation, Amortization and Coronavirus. At the time it seemed pretty funny—well, at least to a bunch of MBAs—so I sent it to a few peopl and forgot about it.

The thing is, as Marx almost said, history repeats itself, first as comedy then as farce. Today, reading the Financial Times over morning coffee, I came across a piece about companies using EBITDAC for real: the FT cites the example of a German manufacturer adding nearly €6 million of non-existent profit back into a poor first quarter on the grounds that they would have made that sum if only it hadn’t been for the virus. Meme to metric in a month. The piece goes on to quote a credit analyst as saying this is “not ideal”. No kidding.

Of course, it’s possible that absent the virus, the company in question might have made such a profit. We just have to take their word for it. In much the same way, I might have had a date with Kate Beckinsale this month if it weren’t for pesky social distancing.

I probably shouldn’t have been surprised, because as financial measures go, EBITDA has form for being used in interesting ways. The basic idea is simple: EBITDA shows a company’s earnings before potentially variable items such interest payments, taxes and depreciation and amortization of assets. As a standalone measure or used in ratios, it allows one to see how cash generative a business is, which might inform a view on whether it can service future interest payments. It also lets one take several businesses, which might have very different sources of funding and therefore interest payments, or variability in taxes, or different policies for depreciating assets (famously subjective), and make a reasonable comparison between them.

But as a commonly-used term that isn’t formally defined, it is particularly susceptible to being twisted to a company’s advantage. Before the whole world went into lockdown, my previous favourite was WeWork’s invention of ‘community adjusted EBITDA’, which didn’t just take out the normal categories but also ignored everyday expenses such as administrative and marketing costs.

In the near term, I suspect the headwinds created by Covid-19 will result in many more examples of this sort of creative accounting. Regular EBITDA can provide a useful snapshot, but it needs to be used in conjunction with other metrics, principally cash flow. EBITDA adjusted for Coronavirus or to remove inconvenient actual costs shouldn’t be seen as anything more than a vanity metric.

Don’t be surprised if the businesses that best weather this particular storm are the ones with the least meme-worthy financial measures.