What Is Article 50?

Article 50 is a clause in the European Union’s (EU) Lisbon Treaty that outlines the steps to be taken by a country seeking to leave the bloc voluntarily. Invoking Article 50 kick-starts the formal exit process and allows countries to officially declare their intention to leave the EU. The United Kingdom was the first country to invoke Article 50 after a majority of British voters elected to leave the union in 2016.

How Article 50 Works

Article 50 is part of the Lisbon Treaty, which was signed and ratified by all 27 member states of the European Union in 2007 and came into effect in 2009. The article outlines how a member nation may leave the EU voluntarily. As noted above, the article states: “Any member state may decide to withdraw from the union in accordance with its own constitutional requirements.”

According to the article’s text:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.
4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.
   A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.
5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

Special Considerations

Article 50 became a subject of serious discussion during the European sovereign debt crisis of 2010 to 2014 when Greece’s economy appeared to be spiraling out of control. In an attempt to save the euro and perhaps the EU from collapsing, leaders considered expelling Greece from the eurozone.

The problem they encountered with Article 50 was that there was no clear guidance for pushing a member state out against its will. Nor was it necessary to remove Greece from the EU—just from the eurozone. Greece was eventually able to reach agreements with its EU creditors.

Origins of Article 50

The European Union began in 1957 as the European Economic Community, which was created to foster economic interdependence among its members in the aftermath of World War II. The original bloc comprised six European countries: the Netherlands, France, Belgium, West Germany, Luxembourg, and Italy. They were joined by the U.K., Denmark, and Ireland in 1973. The EU was formally created by the Maastricht Treaty in 1992, and by 1995 the bloc expanded to 15 members covering the whole of Western Europe. From 2004 to 2007, the EU experienced its largest-ever expansion, taking on 12 new members that included former Communist states.

The Lisbon Treaty was drafted with a view to enhancing the efficiency and democratic legitimacy of the Union and to improving the coherence of its action. The treaty was signed and ratified by all 27 member states in 2007 and came into effect in 2009. The treaty is divided into two parts—the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU). It has 358 articles in total including Article 50.

The author of the provision did not originally see it as being necessary. “If you stopped paying the bills and you stopped turning up at the meetings, in due course your friends would notice that you seemed to have left,” the Scottish peer Lord Kerr of Kinlochard told the BBC in November 2016. He saw Article 50 as being potentially useful in the event of a coup, which would lead the EU to suspend the affected country’s membership: “I thought that at that point the dictator in question might be so cross that he’d say ‘right, I’m off’ and it would be good to have a procedure under which he could leave.”

Example of Article 50

The first country to invoke Article 50 was the United Kingdom, which left the EU on Jan. 31, 2020. It came after a majority of British citizens voted to leave the union and pursue Brexit in a referendum on June 23, 2016, leading British Prime Minister Theresa May to invoke the article on March 29, 2017.

The process was mired by missed deadlines, extensions, negotiations, and stumbling blocks put forth by both British and EU leaders. May’s attempts for an agreement were rejected by parliament. Negotiations were renewed by Boris Johnson, who became prime minister after May resigned.

The country began an 11-month transition period immediately after its departure from the bloc. After leaving the Union, there were no British officials in the European Parliament, and the U.K. lost its veto right within the EU. But the two parties still had to work out a new trade agreement. There were still many issues to resolve during the transition period, including:

• Issues related to pensions
• How both parties would handle law enforcement and security cooperation
• Access to shared fisheries
• Customs and border controls between Northern Ireland and the Republic of Ireland
• Tariffs and other trade barriers

One big cause for concern was the issue of EU nationals migrating to the U.K. or vice versa. Prior to Brexit, an estimated three million EU nationals lived, worked, or studied in the U.K., while one million U.K. nationals did the same in the rest of the EU. Nationals were allowed to cross borders during the transition period but were afterward subject to visa requirements.

Negotiations continued during the transition period, despite many halts and roadblocks. On Dec. 24, 2020, the two sides finally announced a trade deal that would replace the EU’s single market and its customs union with respect to the United Kingdom. The EU-UK Trade and Cooperation Agreement was signed on Dec. 30 and provisionally entered force on Jan. 1. However, it was not fully ratified until the following April. The new trade agreement fully entered force on May 1, 2021.

What Is Artificial Intelligence (AI)?

Artificial intelligence (AI) refers to the simulation of human intelligence by software-coded heuristics. Nowadays this code is prevalent in everything from cloud-based, enterprise applications to consumer apps and even embedded firmware.

The year 2022 brought AI into the mainstream through widespread familiarity with applications of Generative Pre-Training Transformer. The most popular application is OpenAI’s ChatGPT. The widespread fascination with ChatGPT made it synonymous with AI in the minds of most consumers. However, it represents only a small portion of the ways that AI technology is being used today.

The ideal characteristic of artificial intelligence is its ability to rationalize and take actions that have the best chance of achieving a specific goal. A subset of artificial intelligence is machine learning (ML), which refers to the concept that computer programs can automatically learn from and adapt to new data without being assisted by humans. Deep learning techniques enable this automatic learning through the absorption of huge amounts of unstructured data such as text, images, or video.

Understanding Artificial Intelligence (AI)

When most people hear the term artificial intelligence, the first thing they usually think of is robots. That’s because big-budget films and novels weave stories about human-like machines that wreak havoc on Earth. But nothing could be further from the truth.

Artificial intelligence is based on the principle that human intelligence can be defined in a way that a machine can easily mimic it and execute tasks, from the most simple to those that are even more complex. The goals of artificial intelligence include mimicking human cognitive activity. Researchers and developers in the field are making surprisingly rapid strides in mimicking activities such as learning, reasoning, and perception, to the extent that these can be concretely defined. Some believe that innovators may soon be able to develop systems that exceed the capacity of humans to learn or reason out any subject. But others remain skeptical because all cognitive activity is laced with value judgments that are subject to human experience.

As technology advances, previous benchmarks that defined artificial intelligence become outdated. For example, machines that calculate basic functions or recognize text through optical character recognition are no longer considered to embody artificial intelligence, since this function is now taken for granted as an inherent computer function.

AI is continuously evolving to benefit many different industries. Machines are wired using a cross-disciplinary approach based on mathematics, computer science, linguistics, psychology, and more.

Applications of Artificial Intelligence

The applications for artificial intelligence are endless. The technology can be applied to many different sectors and industries. AI is being tested and used in the healthcare industry for suggesting drug dosages, identifying treatments, and for aiding in surgical procedures in the operating room.

Other examples of machines with artificial intelligence include computers that play chess and self-driving cars. Each of these machines must weigh the consequences of any action they take, as each action will impact the end result. In chess, the end result is winning the game. For self-driving cars, the computer system must account for all external data and compute it to act in a way that prevents a collision.

Artificial intelligence also has applications in the financial industry, where it is used to detect and flag activity in banking and finance such as unusual debit card usage and large account deposits—all of which help a bank’s fraud department. Applications for AI are also being used to help streamline and make trading easier. This is done by making supply, demand, and pricing of securities easier to estimate.

Types of Artificial Intelligence

Artificial intelligence can be divided into two different categories: weak and strong. Weak artificial intelligence embodies a system designed to carry out one particular job. Weak AI systems include video games such as the chess example from above and personal assistants such as Amazon’s Alexa and Apple’s Siri. You ask the assistant a question, and it answers it for you.

Strong artificial intelligence systems are systems that carry on the tasks considered to be human-like. These tend to be more complex and complicated systems. They are programmed to handle situations in which they may be required to problem solve without having a person intervene. These kinds of systems can be found in applications like self-driving cars or in hospital operating rooms.

Special Considerations

Since its beginning, artificial intelligence has come under scrutiny from scientists and the public alike. One common theme is the idea that machines will become so highly developed that humans will not be able to keep up and they will take off on their own, redesigning themselves at an exponential rate.

Another is that machines can hack into people’s privacy and even be weaponized. Other arguments debate the ethics of artificial intelligence and whether intelligent systems such as robots should be treated with the same rights as humans.

Self-driving cars have been fairly controversial as their machines tend to be designed for the lowest possible risk and the least casualties. If presented with a scenario of colliding with one person or another at the same time, these cars would calculate the option that would cause the least amount of damage.

Another contentious issue many people have with artificial intelligence is how it may affect human employment. With many industries looking to automate certain jobs through the use of intelligent machinery, there is a concern that people would be pushed out of the workforce. Self-driving cars may remove the need for taxis and car-share programs, while manufacturers may easily replace human labor with machines, making people’s skills obsolete.

What Is Adjusted EBITDA?

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is a measure computed for a company that takes its earnings and adds back interest expenses, taxes, and depreciation charges, plus other adjustments to the metric.

Standardizing EBITDA by removing anomalies means the resulting adjusted or normalized EBITDA is more accurately and easily comparable to the EBITDA of other companies, and to the EBITDA of a company’s industry as a whole.

The Formula for Adjusted EBITDA Is


$\begin{aligned} ∋+IT+DA=EBITDA\\ &EBITDA +\!\!/\!\!-A = \text{Adjusted }EBITDA\\ &\textbf{where:}\\ ∋\ =\ \text{Net income}\\ &IT\ =\ \text{Interest \& taxes}\\ &DA\ =\ \text{Depreciation \& amortization}\\ &A\ =\ \text{Adjustments} \end{aligned}$​NI+IT+DA=EBITDAEBITDA+/−A=Adjusted EBITDAwhere:NI = Net incomeIT = Interest & taxesDA = Depreciation & amortization​

How to Calculate Adjusted EBITDA

Start by calculating earnings before income, taxes, depreciation, and amortization, i.e. EBITDA, which begins with a company’s net income. To this figure, add back interest expense, income taxes, and all non-cash charges including depreciation and amortization.

Next, either add back non-routine expenses, such as excessive owner’s compensation or deduct any additional, typical expenses that would be present in peer companies but may not be present in the company under analysis. This could include salaries for necessary headcount in a company that is under-staffed, for example.

What Does Adjusted EBITDA Tell You?

Adjusted EBITDA is used to assess and compare related companies for valuation analysis and for other purposes. Adjusted EBITDA differs from the standard EBITDA measure in that a company’s adjusted EBITDA is used to normalize its income and expenses since different companies may have several types of expense items that are unique to them. Adjusted EBITDA, as opposed to the non-adjusted version, will attempt to normalize income, standardize cash flows, and eliminate abnormalities or idiosyncrasies (such as redundant assets, bonuses paid to owners, rentals above or below fair market value, etc.), which makes it easier to compare multiple business units or companies in a given industry.

For smaller firms, owners’ personal expenses are often run through the business and must be adjusted out. The adjustment for reasonable compensation to owners is defined by Treasury Regulation 1.162-7(b)(3) as “the amount that would ordinarily be paid for like services by like organizations in like circumstances.”

Other times, one-time expenses need to be added back, such as legal fees, real estate expenses such as repairs or maintenance, or insurance claims. Non-recurring income and expenses such as one-time startup costs that usually reduce EBITDA should also be added back when computing the adjusted EBITDA.

Adjusted EBITDA should not be used in isolation and makes more sense as part of a suite of analytical tools used to value a company or companies. Ratios that rely on adjusted EBITDA can also be used to compare companies of different sizes and in different industries, such as the enterprise value/adjusted EBITDA ratio. 

Example of How to Use Adjusted EBITDA

The adjusted EBITDA metric is most helpful when used in determining the value of a company for transactions such as mergers, acquisitions or raising capital. For example, if a company is valued using a multiple of EBITDA, the value could change significantly after add-backs.

Assume a company is being valued for a sale transaction, using an EBITDA multiple of 6x to arrive at the purchase price estimate. If the company has just $1 million of non-recurring or unusual expenses to add back as EBITDA adjustments, this adds $6 million ($1 million times the 6x multiple) to its purchase price. For this reason, EBITDA adjustments come under much scrutiny from equity analysts and investment bankers during these types of transactions.

The adjustments made to a company’s EBITDA can vary quite a bit from one company to the next, but the goal is the same. Adjusting the EBITDA metric aims to “normalize” the figure so that it is somewhat generic, meaning it contains essentially the same line-item expenses that any other, similar company in its industry would contain.

The bulk of the adjustments are often different types of expenses that are added back to EBITDA. The resulting adjusted EBITDA often reflects a higher earnings level because of the reduced expenses.

EBITDA Adjustments

Common EBITDA adjustments include:

• Unrealized gains or losses
• Non-cash expenses (depreciation, amortization)
• Litigation expenses
• Owner’s compensation that is higher than the market average (in private firms)
• Gains or losses on foreign exchange
• Goodwill impairments
• Non-operating income
• Share-based compensation

This metric is typically calculated on an annual basis for a valuation analysis, but many companies will look at adjusted EBITDA on a quarterly or even monthly basis, though it may be for internal use only.

Analysts often use a three-year or five-year average adjusted EBITDA to smooth out the data. The higher the adjusted EBITDA margin, the better. Different firms or analysts may arrive at slightly different adjusted EBITDA due to differences in their methodology and assumptions in making the adjustments.

These figures are often not made available to the public, while non-normalized EBITDA is typically public information. It is important to note that adjusted EBITDA is not a generally accepted accounting principles (GAAP)-standard line item on a company’s income statement.