Why EBITDA is not (usually) a good proxy for Cash Flow

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Published at : December 06, 2021

When it comes time to transition your business to new owners you'll hear the acronym "EBITDA" a lot. Earnings Before Interest, Taxes, Depreciation and Amortization has become a proxy for cash flows even though, more often than not, they turn out to be very different. Do you know what your EBITDA is? If so, how does this compare to Operating Cash Flows? Better yet, how does your EBITDA track compared with Free Cash Flow ("FCF"). Knowing this may help you drive more value in your business in the lead-up to a transition event. Why EBITDA is not (usually) a good proxy for Cash Flow
EBITDA(usually)proxy