Which performance measurement is often used by start-ups as a focus on cash flow?

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a key performance measurement that is particularly relevant for start-ups focusing on cash flow. This metric provides a clear view of a company’s operational profitability by eliminating the effects of financing and accounting decisions, which can obscure the underlying financial performance, especially in businesses where capital expenses and interest payments can be significant.

Start-ups often prioritize cash flow as they navigate early growth stages and seek to establish financial stability. EBITDA is valuable in this context because it allows stakeholders to assess the company's ability to generate cash from operations without the impact of how the business is financed or the accounting practices used. It reflects the operational efficiency of a business and is often used by investors to gauge potential profitability and the company's financial health.

Other metrics like EBIT focus on earnings before interest and taxes but still include depreciation and amortization, which can vary significantly between companies and impact cash flow assessment. Return on Net Assets (RONA) and Total Shareholder Return (TSR) are typically broader performance indicators that do not specifically measure cash flow generation, making them less relevant for start-ups seeking immediate insight into their cash management.