Yes, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is still widely used as a core financial metric to measure a company's operational profitability, particularly in mergers, acquisitions, and by lenders to assess debt repayment ability. It remains popular for comparing companies across industries by ignoring different financing, tax, and accounting decisions.
In some cases, EBITDA can produce misleading results. Debt on long-term assets is easy to predict and plan for, while short-term debt is not. Lack of profitability isn't a good sign of business health, regardless of EBITDA.
A common myth about EBITDA is that it reflects true cash flow. While EBITDA excludes interest, taxes, depreciation, and amortization to show operating performance, it overlooks working capital needs, capital expenditures, and debt obligations--meaning it's not a full picture of cash available to the business.
Though often shown on an income statement, it is not considered part of the Generally Accepted Accounting Principles (GAAP) by the SEC, hence in the United States the SEC requires that companies registering securities with it (and when filing its periodic reports) reconcile EBITDA to net income.
Although EBITDA is widely used, it is not necessarily a legitimate measure of a company's success, and is often used as an initial guideline prior to deeper analysis. Warren Buffett has famously called EBITDA “utter nonsense”.
According to Buffett, EBITDA is not reflective of a company's true financial performance due to neglecting capital expenditures (Capex) and changes in working capital, among various other issues.
EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) is a popular measure of cash flow, but it is not accurate, and bankers and investors who rely on it as a reliable indicator of repayment ability will be deeply disappointed.
Coca-Cola's ebitda for fiscal years ending December 2020 to 2024 averaged 13.553 billion. Coca-Cola's operated at median ebitda of 13.601 billion from fiscal years ending December 2020 to 2024. Looking back at the last 5 years, Coca-Cola's ebitda peaked in September 2025 at 16.307 billion.
Cons of using EBITDA for business valuation:
EBITDA is not an exact snapshot of cashflow from operations, as it does not account for changes in working capital. Also, it includes certain non-cash expenses, such as stock option compensation and bad debt expense. EBITDA ignores cash outlays for capital expenditures.
How Is Business Profitability Best Measured? The gross profit margin, operating profit, and net profit margin ratios are the most commonly used measurements of business profitability. Net profit margin reflects the amount of profit a business gets from its total revenue after all expenses are accounted for.
Understanding Free Cash Flow and Its Implications
They consider this measure as representative of the level of unencumbered cash flow a firm has on hand. When it comes to analyzing the performance of a company on its own merits, some analysts see free cash flow as a better metric than EBITDA.
Income approach
The common free cash flow on equity (FCEE) method is highly valid for bank valuation, also because it reflects the fact that banks can create value from the liability side of the balance sheet.
This preference reflects his belief that understanding the core earnings power of a business is crucial for making informed investment decisions. In summary, Buffett's preference for EBIT over EBITDA is grounded in his commitment to value investing and understanding a company's true profitability.
But too often it tends to be justified with the argument that, by omitting depreciation and amortisation, EBITDA represents a better measure of profit, one that better approximates cash flow. This is nonsense. Depreciation is a very real cost. It is the cost of consuming productive capacity.
No, they are not the same. Cash flow from operations includes changes in working capital, while EBITDA excludes these changes. EBITDA focuses on profitability from core operations before interest, taxes, depreciation, and amortization.
Warren Buffett's 8+8+8 Rule — A Lesson for Every Professional This rule reminds us of the importance of balance in our daily lives: 8 hours for work, 8 hours for rest, and 8 hours for personal time. This principle highlights the value of employee well-being, productivity, and sustainable performance.