Which measurement evaluates a company's ability to generate cash flow?

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a significant measurement for evaluating a company's ability to generate cash flow. This metric provides insight into the operational performance of a business by focusing solely on earnings derived from core business activities, excluding non-operational expenses and accounting practices like depreciation and amortization.

By highlighting the earnings generated from operations before the impact of financing and accounting decisions, EBITDA serves as a proxy for cash flows generated from core business activities. This is valuable for investors and analysts looking to assess how well a company can maintain and grow its cash generation capabilities, as it reflects the cash that the business generates from its operations without the influence of non-cash accounting items.

In contrast, other options, while relevant for various aspects of financial assessment, do not specifically measure cash flow generation in the same clear manner as EBITDA. For instance, net income includes many non-cash items and can be influenced by taxes and interest, which complicates its use as a direct indicator of cash generation. Return on Net Assets (RONA) is a profitability metric that assesses how efficiently a company uses its assets, but it does not specifically measure cash flow. Total Shareholder Return (TSR) reflects the