In this post we will understand the pitfalls of using EBITDA as a barometer of a company's business strength and will also understand how Cash Flow from Operations and FCF can help to have better insights in a company's business strength Analysts often use EBIDTA to evaluate company financials. EBIDTA is essentially earnings before interest, tax, depreciation and amortization and is commonly referred to as operating profit. The operating profit is a measure of how well a company is able to manage expenses in running the day-to-day operations. But EBIDTA may not give the complete picture of a company's business strength. More often than not companies try to dress up financial statements using EBIDTA and such companies are more likely to do fraudulent transactions. Since EBIDTA excludes a number of non-cash charges, it does not give a true picture of a company's financial standing . One of the non-cash charge excluded is depreciation. In reality, depreciation entails