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Most CEOs place enormous confidence in their metrics—far more than those metrics deserve.

EBITDA becomes the basis for valuation.
Free Cash Flow becomes the green light for major investments.
Net Income gets treated as a proxy for profitability.
Gross Margin gets used to gauge product or unit economics.

Individually, these numbers look credible. But without context, they distort decision-making, mask underlying risks, and create an illusion of performance that doesn’t hold up under real financial pressure.

In today’s issue, I’m breaking down why these commonly trusted KPIs mislead even experienced executives, how that misunderstanding affects EBITDA, cash flow, and valuation, and what financially intelligent leaders do differently.

Here’s what we’re covering this week:

• Black Friday 2025 is coming, and it will be exceptional—one deal per day, each available for 24 hours only.

• Why the metrics leaders rely on most—EBITDA, Free Cash Flow, Net Income, Gross Margin—regularly mislead decision-makers.

• How to interpret your KPIs through cash, capital intensity, and value creation so you avoid costly assumptions and make stronger strategic decisions.

Black Friday is coming, and this year I’m doing something different.

I’ll be releasing one deal per day—each available for just 24 hours. One day, one offer, and once it’s gone, it’s gone. If you’ve been waiting to get any of my infographics, courses, or financial tools, this is the week to pay attention.

How The Metrics CEOs and CFOs Trust Most Are the Ones Most Likely to Mislead Them

Across industries, I’ve been seeing the same pattern for over a decade: CEOs and CFOs rely on a number of KPIs but interpret them without the context required to make strong strategic calls. That gap between the metric and the reality behind it quietly damages cash flow, restricts capital flexibility, and erodes value over time.

Let’s break down where the misunderstandings come from and why they matter.

EBITDA: Interpreted as a Cash Proxy When It Isn’t One

EBITDA is often used as a stand-in for operating performance, yet it omits the very constraints that shape a company’s financial capacity.

It excludes capital expenditures, interest obligations, and working capital movements—the items that determine whether the business can sustain growth, meet obligations, and preserve liquidity.

Leaders who lean too heavily on EBITDA overestimate performance and underestimate risk, which leads to sequencing investments incorrectly and misjudging financing capacity.

Free Cash Flow: Assumed to Be Fully Discretionary When It Isn’t

Free Cash Flow is powerful, but only when calculated rigorously. The common version—operating cash flow minus total CapEx—ignores recurring reinvestment needs and mandatory debt repayments.

The number looks larger than the business can actually deploy. When leaders act on that inflated view, commitments outpace real cash availability, forcing reactive borrowing or deferred execution.

Net Income: Viewed as Profitability When It Says Nothing About Value

Net Income is an accounting result, not a measure of value creation. It doesn’t capture capital intensity, reinvestment requirements, or whether returns exceed the cost of capital. A company can show strong earnings while quietly destroying value because it’s under-earning relative to the capital it deploys.

This disconnect misleads executives into believing they’ve achieved profitability when, strategically, the business is not generating economic return.

Book Value: Treated as a Floor When It Reflects None of the Future

Book Value is rooted in historical cost accounting. It rarely reflects economic reality, competitive positioning, or future earning power. For modern businesses—especially those driven by intellectual property or recurring revenue—Book Value offers little insight and often distorts risk assessment.

Gross Margin: Used as a Primary Benchmark When It Excludes Everything That Drives Cash

Gross Margin tells you what happens before operating expenses, overhead, and reinvestment. It reveals product economics, not business economics.

High Gross Margin can coexist with weak operating cash flow, strained liquidity, or rising capital requirements. When companies scale based on Gross Margin alone, they often misjudge the cash burden of growth.

The Real Issue: These Metrics Aren’t Wrong—They’re Incomplete

Executives don’t get misled because the numbers themselves are flawed. They get misled because the numbers don’t tell the full story. Each metric captures a narrow slice of performance, and the pieces that get left out are often the ones that matter most. When those omissions go unrecognized, leaders make decisions with a level of confidence the underlying economics simply don’t support.

The better question isn’t “Is this metric accurate?”
It’s “What isn’t this metric showing me?”

That shift changes everything. Strong executive decision-making starts with examining how each KPI reflects cash movement, capital intensity, reinvestment requirements, and long-term value—not just accounting outcomes. When leaders look at metrics through that lens, the picture becomes clearer and decisions become far more grounded.

Financial Infrastructure and Leadership Capability: Why You Need Both

Metrics only become meaningful inside the right environment—one where a financial system provides the full picture and leadership has the capability to interpret it.

Without both elements working together, even the best dashboards or the most sophisticated models turn into isolated data points rather than strategic tools.

Financiario provides best-in-class CFO Office infrastructure to help you scale with real-time visibility into your results and their impact across the business present and future.

Leaders get automated rolling forecasts, cash dynamics, working capital planning, and directly impact on valuation drivers, supported by a unified model and board-ready reporting.

It replaces surface-level metrics with a cohesive financial foundation that shows how decisions cascade through the business.

The CEO Financial Intelligence Program enables you and your leadership teams to develop the financial capability that creates long term enterprise value.

It develops your ability to interpret the numbers accurately, challenge assumptions, pressure-test scenarios, understand capital implications, communicate impactfully and convert financial data into strategic action.

You can implement either one independently. But when they’re used together, they close the financial intelligence gaps that quietly cost companies millions through delays, misallocated resources, trapped cash, and valuation loss.

Check them out to learn more and reachout with any questions by replying to this email.

Featured in Forbes

In case you missed it, Forbes published a feature highlighting my work and the role Financiario plays in helping executives understand the financial impact of their decisions.

The article reinforces a point I see every day: leaders don’t just need access to numbers—they need the ability to interpret them. As markets tighten and capital becomes more selective, financial literacy is becoming a defining leadership advantage.

The piece was a meaningful moment for both me and the company, and it reflects the growing demand for financial intelligence at the executive level.