would likely have decreased net income due to depreciation; however, as depreciation is a non-cash expense[5] the operating cash flow would provide a more accurate picture of the company's current cash holdings than the artificially low net income.
[6] Earnings before interest, taxes, depreciation and amortization or just EBITDA is a kind of operating income which excludes all non-operating and non-cash expenses.
[2] Thus, it can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures (which may also be deemed a demerit of the EBITDA measure).
It is also a useful metric for understanding a business’s ability to generate cash flow for its owners and for judging a company’s operating performance.
The difference between EBITDA and OCF would then reflect how the entity finances its net working capital in the short term.