What is a better metric to reflect cash flow than EBITDA?

Operating income, also known as EBIT (Earnings Before Interest and Taxes), is considered a better metric to reflect cash flow than EBITDA because it provides a closer approximation of the cash generated from operations. While EBITDA does exclude interest, taxes, depreciation, and amortization, it might not accurately represent how much cash is actually available to the company since it adds back non-cash expenses.

Operating income, on the other hand, accounts for revenues and expenses directly related to company operations. It provides insight into the performance of the core business activities before the effects of financing and tax strategies come into play. By focusing on these operational aspects, EBIT gives a clearer picture of the operational cash flow and profitability of a business.

Additionally, EBIT helps to better reflect the direct impacts of operational efficiencies or inefficiencies, management decisions, and cost control measures that might affect cash flow. This makes EBIT a more reliable indicator for stakeholders interested in understanding the cash-generating capabilities of a company compared to EBITDA, which may give a less nuanced view due to its adjustments.

The other options, such as net income, gross revenue, and cash reserves, do not provide the same level of insight into operational performance and cash generation. Net income includes a variety of non-operational factors and thus