Can you really trust EBITDA to measure a company’s profitability?
In many boardrooms and investor presentations, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is often highlighted as a key performance indicator. It provides a simplified and normalized snapshot of a company’s financial health.
But here’s the challenge: by excluding real costs such as asset depreciation, interest on debt, and tax obligations. EBITDA can paint an overly optimistic picture of profitability.
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While EBITDA is a helpful metric, it does not tell the whole story.
In my view, cash flow and working capital performance offer a more accurate representation of a company’s financial strength.
What’s your take?