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EBITDA Is Not Cash Flow


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Guest Bronco

Yeah - when I pay the IRS, I use cash. EBITDA excludes that small piece.


Also doesn't distinguish between CF from operations vs. accounting earnings from operations.  I guess the point of EBITDA is that it is more normalized, but I like FCF and looking at 3 - 5 years.  Cuts through a lot of the lies IMO.


I remember looking at the P&L of worldcom 8 - 10 years ago when earnings were good and FCF was a mess (they shoved a lot of expenses in cap-ex).  This is just one good example.


Cash is king in my book.  #2 - great capital allocation.  Trick is finding both.  I smart young man from Omaha was pretty good at both....

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There are very few businesses where EBITDA actually means anything. If I put 5000$ of cash per year to maintain it but I don't count it at the end when talking about my disposable income I'm just lying to myself I'm not getting richer... same thing with companies.



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