📚 Valuation Myth: EBITDA Tells the Full Story

~ Certified Business Appraiser

The Myth:
EBITDA represents the company’s cash-generating power.

The Reality:
While EBITDA strips out some non-operational expenses, it ignores maintenance CapEx, working capital changes, taxes, and debt service needs. Free cash flow — not EBITDA — drives true value.

Why It Matters:
Relying only on EBITDA can dramatically overstate a company’s economic benefit to a buyer.

Practical Tip:
Always adjust EBITDA to account for real-world cash obligations before valuing a business.