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Fire Your Stock Analyst!: Analyzing Stocks on Your Own by Harry Domash

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EBITDA vs. Operating Cash Flow

EBITDA stands for earnings before interest, taxes, depreciation and amortization. EBITDA offers an alternative to operating cash flow for evaluating a company’s performance. EBITDA is similar in purpose to OCF in that it attempts to describe the actual cash generated by a company’s main business, but it is calculated differently.

Where the OCF calculation starts with net income, the EBITDA calculation starts with operating income, which is also described as EBIT, earnings before interest and taxes. EBITDA is calculated by adding back deprecation and amortization expenses to operating income.

EBITDA is not defined by generally accepted accounting practices (GAAP), and it is not listed on most financial statements. ...

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