When employers evaluate the health of their company and where they should reinvest in the business, they typically start by looking at EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and cash flow. As financial metrics, EBITDA and cash flow each have value in assessing a company's financial health and performance but serve different purposes and provide distinct insights.

EBITDA: This metric reveals a company's core operational profitability, excluding interest, taxes, and non-operational elements, but it has limitations. It doesn't account for essential cash flow elements like capital expenditures and working capital, making it an incomplete measure of a company's overall financial health.

Cash Flow: Using cash flow to take the financial temperature of a business places the primary focus on liquidity, the ability to generate and manage cash. Types of cash flow include operating, investing, and financing cash flow. People tend to think of operating cash flow when the subject arises.

Where Should Employers Focus?

EBITDA and Cash Flow each have merits as a financial measure. You're likely to gain the best insights by considering them together. How much weight you give to each will depend on your company's goals:

1. Growth: Companies experiencing or anticipating growth might prioritize EBITDA to showcase operational profitability to attract investors.

2. Servicing Debt: Businesses with debt obligations emphasize cash flow to ensure they meet financial commitments.

3. Attracting or Keeping Investors: The choice may hinge on investor preferences-some prefer EBITDA for valuation, while others prioritize cash flow for risk assessment.

4. Industry Norms: Your Industry may value one measure over the other. Some sectors place more importance on EBITDA, while others prioritize cash flow.

Ideally, EBITDA and Cash Flow should both be considered for a comprehensive financial perspective.

How PrideStaff Can Help

Partnering with a staffing agency like PrideStaff can give businesses more control over their finances. By providing skilled temporary staff, streamlining recruitment processes, and managing payroll efficiently, staffing agencies contribute to their clients' overall financial health and success.

If you'd like to learn more about how PrideStaff can help you control costs while achieving your business goals, contact your local PrideStaff office today.