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👀 EBITDA and Operating Cash Flow: okay, not the same, but when the same?


📊 EBITDA and 💰 Operating Cash Flow are two financial metrics used to evaluate a company's performance considering the ordinary and main business activity🏭🏢💼


🌈🦄🎨🤝 in a fairy world they can be equal only when there are no changes in working capital (along with other conditions);


🔄 However, in most cases, they are not identical because of actual changes in working capital and other non-operating items;


≠ It is now known, in fact, that their values are not always equal: both are used to measure the profit generated by operating activities, without factoring in other accounting stuff such as depreciation, etc. However, let's imagine a scenario where paradoxically they are equal, and let's explore it further↴


👉EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization

👉Operating Cash Flow = cash generated or used by a company's normal business operations within a given period, so it excludes financing and investing activities and includes adjustments for non-cash items

🎭THEY ARE ≠ 2 different financial metrics used to evaluate a company's financial performance;


🕊️🌈✨One scenario where EBITDA may be equal to operating cash flow is when a company has no changes in working capital🚚📦 - which means that the amount of cash received from customers is equal to the amount of cash paid to suppliers, employees and other services needed and purchased by the company➠in this scenario, the net change in working capital would be zero, current assets would equal current liabilities... and the operating cash flow would be equal to ↔️ EBITDA⚖️💲


📜 Other conditions to have this equivalence are: absence of payments of passive interests or receipts of active interests + absence of payments of taxes and fees + absence of other uncommon and non-standard assets and liabilities;


👀 However, in most cases, EBITDA and operating cash flow will not be equal, as there are usually changes in working capital and other non-operating items that affect the cash flow.


~≈≃≅ At best, EBITDA can be a good approximation of operating cash flow


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