Twenty years ago, earnings before interest, taxes, depreciation and amortization - or the more catchy acronym EBITDA - was put on the map by leveraged buy-out teams wanting to measure a company's ability to service its debt. Today the financial benchmark seems to be a firm fixture on every company's annual report and in many analysts' tool kit, although its value has also become a topic of debate.

In a recent report, Putting EBITDA into Perspective, Pamela Stumpp, senior vice-president of Moody's Investors Service, argues: 'The use of EBITDA has become so widespread, and the concept used synonymously with cash flow so often, that users have apparently begun to overlook its limitations. Among its main shortcomings are its failure to consider elements critical to an issuer's liquidity, plus it provides no information as to whether a company is able to meet the requirements of its borrowing base.'