CFAI mock 2012 PM 35

Why EBITDA will overestimate CFO if working captial is growing? Thanks.

EBITDA doesnt account for capex or the increases in working capital. two drivers of CFO. also taxes and interest which are part of CFO aren’t picked up just using EBITDA. all causing overstatements.

thanks for the answer

CAPEX is CFI…not CFO. Ignored by both.