metrics explained

EBITDA vs Operating Income: What's the Difference?

EBITDA and operating income are two important financial measures used to assess a company's profitability. They both measure a company's ability to generate income from its operations, but there are some important differences between the two.

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It is a measure of a company's profitability that excludes these non-operating expenses. Operating income, on the other hand, includes these expenses.

EBITDA is often used as a measure of a company's ability to generate cash flow from its operations. This is because it excludes non-cash expenses like depreciation and amortization, which can be significant. Operating income is a more accurate measure of a company's profitability, but it can be more difficult to compare across companies because of the different ways that companies account for expenses.

EBITDA is often used to assess a company's financial health, but it is not a perfect measure. It excludes some important expenses, like taxes and interest, that can have a significant impact on a company's bottom line. It also excludes depreciation and amortization, which can be significant cash expenses.

Operating income is a more accurate measure of a company's profitability, but it can be more difficult to compare across companies because of the different ways that companies account for expenses. EBITDA is a more useful measure when comparing companies within the same industry, but operating income is a more useful measure when comparing companies across industries.

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