Difference between EBITDA and cash flow

EBITDA and cash flow are the two measures for evaluating a companies financial performance.These terms are quite close to each other ,and at the same time  hugely different when place  in balance sheet of company.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization.it is a measure of a company's cash flow before certain deductions. It gives us idea about how much money a company is making before taxes, depreciation and amortization have been deducted.

The amount of cash generated and used by a company in a given period. It is calculated by adding noncash charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project, or to a business as a whole.

EBITDA gives the investor an idea of how much money the company has made before its deductions. It is especially useful for a new company who has just started business and has not yet been hit with taxes, payments to creditors,etc,whereas  cash flow takes into account the all expenses and working capital while assessing the company’s financial position.

EBITDA gives good picture of newly established company only,the statement of a business's cash flows is often used by analysts to gauge financial performance. Companies with ample cash on hand are able to invest the cash back into the business in order to generate more cash and profit.

1.EBITDA is measure of operating income before the deduction of Interest, Taxes, Depreciation and Amortisation.Cash flow is related to a broad measure of cash generated by any company or firm.

2.EBITDA cannot take working capital into account whereas Cash flow takes working capital  as well while assessing the company’s financial position.

3. While cash flows can detect signs of poor financial management, EBITDA will not detect such warning signs.

4.EBDITA is good measure for newly establish company whereas cash flow is good measure of established company .

5. Cash flow is better than EBITDA in determining the overall health of a company or a firm.