Earnings Before Interest, Taxes, Depreciation and Amortization - sometimes refered to as operational cash flow, is an approximate measure of a company's operating cash flow based on data from the company's income statement. It is calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.

Since it eliminates the impact of most financing and accounting decisions, EBIDTA provides a good "apples-to-apples" profitability comparison between companies or industries. For example, EBITDA as a percent of sales can be used to find companies that are the most efficient operators in an industry.

EBITDA does well at measuring profitability, but it shouldn't be used as a replacement for cash flow. Operating cash flow is a much better measure of how much cash a company is generating. For example, a company holding a growing stash of unpaid receivables could conceivably report a sterling EBITDA that hides the real story—that the company has the potentially disastrous problem of a customer base that can't pay its bills.