Series 79 practice questionhardFinancial Statement Analysis
Which line item is most likely to create a difference between EBITDA and unlevered free cash flow in an acquisition model?
- ARevenue
- BCapital expenditures✓ Correct answer
- CGross profit
- DShares outstanding
Explanation
Why B — Capital expenditures
Capital expenditures Unlevered free cash flow deducts capital expenditures because they are real cash uses required to maintain and grow the business. EBITDA ignores capex, so businesses with identical EBITDA can have very different cash generation profiles.
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