What it means
EBITDA strips out non-cash charges and capital structure decisions to give a rough proxy of operating cash generation. It removes the effects of how a company is financed (interest), where it operates (tax) and how aggressively it amortizes (D&A).
Why it matters
EBITDA is loved because it normalizes companies for comparison and is the basis for the dominant private-equity valuation metric (EV/EBITDA). It's hated because it pretends depreciation isn't a real cost - which, for capex-heavy businesses, is fiction.
How to use it
Use EBITDA when comparing capital-structure-different businesses or when triangulating a buyout valuation. Don't use it for technology or asset-heavy industrials without also looking at free cash flow - Buffett's 'bullshit earnings' critique applies here.
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