Everyone Quotes EBITDA. Few Know What It Hides.

Everyone quotes EBITDA — but very few people can tell you what it’s actually leaving out.

EBITDA strips out interest, taxes, depreciation, and amortization to show what the operating business earns before financing and accounting decisions get involved. That makes it a useful way to compare two companies on operations alone, which is exactly why buyers and lenders lean on it so heavily.

But EBITDA is not cash, and it isn’t profit — it ignores debt service, real capital replacement, and working capital swings, which is how a business posts strong EBITDA and still can’t make payroll.

Net income tells you what’s left for the owners, operating margin tells you whether the core model works, and free cash flow tells you what actually hits the bank. Each answers a different question, and the mistake is picking one number and treating it as the whole story.

The value-added move isn’t computing these metrics — it’s knowing which one to reach for depending on whether you’re pricing, borrowing, or selling.

Know your EBITDA. Just don’t confuse it with the money in your account.