EBITDA vs EVA vs RI

 

EBITDA is not performance.
It’s financial comfort food.
Feels good. Adds no real value.

Here’s the uncomfortable truth:
EBITDA is often used to make bad businesses look fine on paper.

But it won’t tell you:

✕ If you’re covering the true cost of capital
✕ If equity holders are earning a return
✕ If your business is quietly destroying value

It’s just EBIT with depreciation and amortization slapped back on —
Like repainting a sinking ship.

You want real answers?

Use EVA to ask:
→ Are we beating our total cost of capital?

Use RI to ask:
→ Are equity investors earning a premium?

Use EBITDA to ask:
→ How fast can we lie to ourselves?

Here’s the rule:

✓ Use EVA to measure company-wide value
✓ Use RI to evaluate business units
✕ Use EBITDA for quick ops checks — then move on

Stop dressing up EBIT and calling it strategy.
Start measuring value - not optics.

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