Lease Accounting Change Makes EBITDA an Even Muddier Metric

The corporate earnings measurement known as EBITDA stormed into popular use during the leverage buyout boom of the 1980s, as investors looked for a measure better than net income to figure out how much cash a company generated, and ultimately whether it could handle its debt.

In the decades since, it evolved into a tool for evaluating everything from credit strength to equity multiples even as it was derided as “earnings before expenses” and came under scrutiny at the Securities and Exchange Commission.

Now, sweeping changes to lease accounting rules instituted this year have delivered a blow to the relevance ...