Net income vs EBITDA as a proxy for CFO
I'm asked to chose a proxy for CFO between two. Net income as CFO is equity indicator, Net income - accounting result, CFO - cash result. But on the other side EBITDA include D&A, but interest expense, taxes and it's more like a proxy for FCF(F,E).
Which better? Thank you.
Sort of a weird question because they're both not very good. Gun to my head, id choose net income because its at least a metric that includes leverage (both cfo and NI are equity multiple denominators)
I don't understand, you choose Ni or EBITDA ?
He said net income
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I'll go for EBITDA (minus tax preferably) because of the D&A. In 75% of businesses D&A is much higher than interest expense. Next to that net income can have all sorts of disturbing items like income from equity investments.
EBITDA is usually a proxy for cash from operations
Thank you. I thought EBITDA is more suitable proxy for FCF, no?
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