Client EBITDA and MOL: what they tell you before extending credit

In short: EBITDA and MOL (gross operating margin) show the margin from a client's ordinary operations before depreciation, interest and taxes: for Borsa Italiana they are comparable measures. They are not items in the accounts: you derive them from the income statement. A positive EBITDA is a good sign, but it is not cash and does not guarantee payment.

EBITDA and MOL: what the difference is

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation, that is, earnings before interest, taxes, depreciation and amortisation. The Borsa Italiana glossary defines it as one of the main profitability indicators of a company and as a measure comparable to the gross operating margin. MOL is the Italian acronym for margine operativo lordo (gross operating margin), and the Margine Operativo Lordo entry in the same glossary describes EBITDA as a measure of gross operating margin.

In practice the two terms are used as synonyms. The important point is another one: neither of them is defined by the accounts format. The ESMA guidelines on alternative performance measures cite EBITDA precisely as an example of an indicator different from those defined by accounting rules, obtained by adding or subtracting amounts from the financial statement data. For this reason, two analysts starting from the same accounts can reach slightly different numbers: it depends on which items they decide to add or deduct. When you read an EBITDA calculated by someone else, always ask how it was calculated.

How they are derived from the statutory income statement

The income statement of Italian companies follows the format of art. 2425 c.c. The items you need are these:

• A) Value of production: sales revenues (A1), changes in inventories and work in progress (A2, A3), increases in fixed assets from internal work (A4), other revenues and income (A5);
• B) Costs of production: raw materials and goods (B6), services (B7), use of third-party assets (B8), personnel (B9), depreciation and write-downs (B10), change in inventories of raw materials (B11), provisions for risks (B12), other provisions (B13), other operating charges (B14);
• difference A - B, which the statutory format already shows as calculated.

There are two routes, which with the same choices lead to the same number:

1. from the top (MOL): value of production less B6, B7, B8, B11 and B14 gives the added value; deducting the personnel costs (B9) gives you the MOL;
2. from the bottom (EBITDA): to the difference A - B you add depreciation and write-downs (B10) and provisions (B12 and B13), that is, the costs that were not cash outflows in the year.

The most debated choice is the write-down of receivables (B10, letter d): some add it together with depreciation, others leave it among costs because it precisely measures the risk of not collecting. For a supplier assessing a client, it is a figure to look at separately: if it rises, your client is in turn struggling to collect from its own customers.

In abbreviated accounts the calculation is the same: art. 2435-bis c.c. allows some items to be grouped (for example the depreciation and write-downs of fixed assets, B10 a, b and c), but the structure of the income statement remains that of art. 2425.

Numerical example (invented figures)

Example: a client, which we will call Alfa Srl, with this income statement. The figures are invented to explain the calculation; they are not statistics.

From the bottom: 160,000 + 90,000 (B10) + 10,000 (B12) = EBITDA of 260,000 €. From the top: 2,020,000 - 900,000 - 400,000 - 60,000 - 20,000 = 640,000 of added value; less 380,000 of personnel = MOL of 260,000 €. If instead you leave the write-down of receivables among costs, EBITDA falls to 250,000 €.

Three useful readings for anyone extending credit to Alfa:

• margin on revenues: 260,000 on 2,000,000 of revenues, that is 13%. Compare it with the previous year: if it falls, costs are rising faster than prices;
• interest coverage: 260,000 divided by 40,000 of interest is 6.5. The margin covers interest 6.5 times, but remember that the debt also has to be repaid, not only paid interest on;
• debt relative to margin: if the balance sheet shows bank debts of 900,000 € and liquidity of 100,000 €, net debt is 800,000 €, that is, about 3 times EBITDA. There is no statutory threshold valid for everyone: what counts is the comparison over time and with similar companies.

What it tells you about the client's ability to pay you

EBITDA is the margin that ordinary operations generate before banks, the tax authority and investments take their share. For a supplier it is a first filter:

• Negative EBITDA: ordinary operations do not even cover current costs. The client pays its suppliers only with new debts, shareholder contributions or the sale of assets. This is the case where caution on credit is at its highest.
• Positive EBITDA but declining for several years: the cushion is getting thinner. Read the profit, the interest and the short-term debts before increasing the payment terms.
• Positive and stable EBITDA: the company generates a margin. What remains to be understood is how much of it becomes cash and how much goes on debt instalments and investments.

If the client closed the year with a loss but with positive EBITDA, the loss may depend on depreciation, interest or write-downs: the guide on a client with a loss in its accounts explains how to reason in that case.

The limits: EBITDA is not cash

The most important limit is this. EBITDA is calculated with revenues and costs on an accruals basis, not with receipts and payments. A client can have a solid EBITDA and still be without liquidity. Example, again with invented figures:

With 260,000 € of EBITDA, Alfa burned through 150,000 € of cash. Other limits to keep in mind:

• it ignores investments: a company that often has to renew its machinery needs more margin than one that does not invest;
• it ignores debt: the same EBITDA is solid for a lightly indebted company and fragile for a heavily indebted one. To compare flows and instalments you need the DSCR;
• it is old: it comes from the latest filed accounts, so it describes a year that has already closed;
• it depends on estimates: provisions and write-downs are decided by the directors, and their choice shifts the difference A - B.

To see the real flows you would need the cash flow statement, which companies with abbreviated accounts are not obliged to prepare: the guide on the client's cash flow statement covers this. For the full reading picture, go back to the guide to reading a client's or supplier's accounts.

Sources

• Art. 2425 c.c., content of the income statement (Brocardi.it) (accessed 2026-11-01)
• Art. 2435-bis c.c., abbreviated-form accounts (Brocardi.it) (accessed 2026-11-01)
• Borsa Italiana, glossary: Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) (accessed 2026-11-01)
• Borsa Italiana, glossary: Margine Operativo Lordo (accessed 2026-11-01)
• ESMA, Guidelines on alternative performance measures, ESMA/2015/1415it, paragraphs 17 and 18 (accessed 2026-11-01)