“Stories and lessons from an unexpected journey in finance.”

EBITDA is the only financial metric named entirely after the things it ignores.

Earnings Before Interest, Taxes, Depreciation and Amortization. The name is a list of exclusions. That’s not a criticism — it’s the whole design, and forgetting it is how people get into trouble.

Here’s the household version.

Say you earn $120,000. That number tells you something real about your earning power, and it’s the right number to compare against someone else’s job offer.

It is not what’s in your account. Taxes come out. The interest on your mortgage comes out. The roof you replaced in March came out. And if your employer paid you sixty days late all year, some of it never showed up at all.

Same salary. Completely different year.

That gap has four names, and they’re the same four in a business.

Working capital. You booked the revenue, the customer hasn’t paid. EBITDA counted it. Your bank account didn’t.

Capital expenditure. You bought the equipment. EBITDA ignores it — depreciation is the D. The cash left in one payment.

Interest. If the business carries debt, this is real money leaving every month, and EBITDA is calculated before it.

Taxes. Also real. Also excluded by design.

So EBITDA is a reasonable way to compare two businesses stripped of how they’re financed and what they own. It is a poor way to answer whether you can make payroll in March.

I’ve been brought into companies that looked healthy on an EBITDA line and were weeks from a covenant breach. Not because anyone lied. Because everyone was reading the metric that excluded the thing that was killing them.

If you take one thing from this: EBITDA tells you whether the business model works. Cash tells you whether the business survives long enough to prove it.

You need both, and only one of them can be spent.

What’s the number your leadership quotes most — and do you know what it leaves out?

#TheAccidentalCFO #FinancialLiteracy #EBITDA #CashFlow #INERSEC