EBITDA vs. Operating Cash Flow
1. Operating cash flow is a better measure of a company’s cash generation since it adds non-cash expenses (depreciation and amortization) to net income while also accounting for changes in working capital, such as receivables, payables, and inventories, that use or produce cash.
2. Working capital trends play a vital role in determining how much cash a firm generates. If investors exclude working capital changes from their research and rely exclusively on EBITDA, they risk missing clues—for example, challenges with receivables collection—that might hamper cash flow.
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