We all are obsessed with chasing EBITDA growth, but this singular focus can be misleading. The reality is that EBITDA can be manipulated through various accounting tactics, whereas cash flow remains an honest and unalterable indicator of a company’s financial health.
The problem with EBITDA is that it overlooks critical expenses like interest, taxes, depreciation, and amortization. Moreover, with some creative accounting, EBITDA can be artificially inflated:
This manipulation can lead to a disturbing consequence: an impressive EBITDA figure on paper, while the company quietly depletes its cash reserves.
If you’re concerned about the reliability of your financial metrics, contact us today to ensure that your financial reporting is transparent and accurate.
Cash flow, on the other hand, provides a clear picture of a company’s financial situation:
Unlike EBITDA, strong cash flow indicates that a company is genuinely financially healthy. It’s possible to report high EBITDA while running out of money, but robust cash flow means you’re in control.
If you need help managing your company’s cash flow and ensuring financial stability, reach out to us for expert advice and strategies.
It’s time to shift focus away from EBITDA and toward optimizing cash flow, liquidity, and capital allocation. At the end of the day, cash flow:
Don’t be fooled by manipulated EBITDA figures. Prioritize cash flow, and you’ll be rewarded with a financially stable and prosperous business.
If you’re ready to make the shift toward better cash flow management, contact us now for a consultation.
