Is EBITDA the same as cash flow?

No. EBITDA ignores working capital, capital expenditure, interest and tax, all of which move cash. Operating cash flow and free cash flow measure cash.

Where is EBITDA used?

In lending, valuation multiples and covenants. It makes companies with different capital structures and depreciation policies easier to compare.

EBITDA vs operating income

Operating income is profit after all operating expenses, depreciation and amortization included; EBITDA adds depreciation and amortization back, so it is always at least as large and ignores what the company's assets cost to use up.

Each, defined

EBITDA

EBITDA is a profitability metric, calculated as Net income + interest + income taxes + D&A (≈ operating income + D&A with no other non-operating items). Non-GAAP — see below.

Formula: Net income + interest + income taxes + D&A (≈ operating income + D&A with no other non-operating items)

EBITDA in the glossary

Operating income

Operating income — Gross profit less operating expenses — the result of the core business before interest, other income and tax.

Operating income in the glossary

Side by side

EBITDA and Operating income compared
	EBITDA	Operating income
GAAP line	No — a non-GAAP measure	Yes — an income statement subtotal
Depreciation and amortization	Added back	Deducted
Interest and income tax	Excluded	Excluded
Typical use	Lenders, valuation multiples	Statement readers, operating margin

From operating income to EBITDA

Northwind has no interest or tax in its first month, so its operating income is its net income, $2,550. Adding back $500 of depreciation on the van gives EBITDA of $3,050. (Northwind Traders, Inc., September 2026, accrual basis, USD.)

From operating income to EBITDA
Line	Amount
Operating income	2,550.00
Add back depreciation	500.00
Add back amortization	0.00
EBITDA	3,050.00

How they relate

Operating income is a GAAP subtotal on the income statement. EBITDA is not a GAAP measure: it is computed from the statements, and a public company that reports it must reconcile it to net income under SEC Regulation G.

EBITDA is popular because it approximates cash earnings before financing and investment decisions. Its weakness is the same thing: a business that must keep buying equipment has a real cost that EBITDA leaves out.

Questions

Is EBITDA the same as cash flow?: No. EBITDA ignores working capital, capital expenditure, interest and tax, all of which move cash. Operating cash flow and free cash flow measure cash.
Where is EBITDA used?: In lending, valuation multiples and covenants. It makes companies with different capital structures and depreciation policies easier to compare.

Also confused with these

EBIT vs EBITDA

See it computed

Worked through: the calculators, the journal entries and the tools that use these terms.

Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.