Unlike EBITDA, cash from operations includes changes in net working capital items like accounts receivable, accounts payable, and inventory. However, all other non-cash items like stock-based compensation, unrealized gains/losses, or write-downs are also added back. Like EBITDA, depreciation and amortization are added back to cash from operations. Operating Cash Flow (or sometimes called “cash from operations”) is a measure of cash generated (or consumed) by a business from its normal operating activities. As our infographic shows, simply start at Net Income then add back Taxes, Interest, Depreciation & Amortization and you’ve arrived at EBITDA.Īs you will see when we build out the next few CF items, EBITDA is only a good proxy for CF in two of the four years, and in most years, it’s vastly different. It is often claimed to be a proxy for cash flow, and that may be true for a mature business with little to no capital expenditures.ĮBITDA can be easily calculated off the income statement (unless depreciation and amortization are not shown as a line item, in which case it can be found on the cash flow statement).
![operating free cashflow operating free cashflow](https://cdn.educba.com/academy/wp-content/uploads/2019/01/Free-Cash-Flow-Formula-11.jpg)
In this cash flow (CF) guide, we will provide concrete examples of how EBITDA can be massively different from true cash flow metrics.
![operating free cashflow operating free cashflow](http://image.slideserve.com/385242/free-cash-flow-calculation-l.jpg)
CFI has published several articles on the most heavily referenced finance metric, ranging from what is EBITDA to the reasons Why Warren Buffett doesn’t like EBITDA.