Interview Model Test Question: EBITDA vs Net Income
I was building an LBO model for a model test and the interviewer asked if I could build to FCF from EBITDA instead of Net Income. Could someone explain how to do this? (without just building down to Net Income from EBITDA)
EBITDA-DA-Int-Tax+DA-Capex-chg.NWC is the simple way
But this is essentially just building to net income. The interviewer asked not to build to net income first. said you can go directly from EBITDA to FCF without intermediary of net income first
This doesn't build to net income it builds to NOPAT... If you're not misunderstanding what he said and your interviewer said that is wrong then they were probs looking for a shorthand proxy like Ebitda less maintenance capex.
How is that NOPAT.....you subtracted interest....
RIP
it's EBITDA - Interest - Taxes - Change in NWC - CapEx
My question here is, since taxes are based off of EBIT, don't we need to subtract D&A to get to EBIT anyways? Not sure what the point would be of not just building to Net Income first
this reminds me of this thread: https://www.wallstreetoasis.com/forum/investment-banking/associate-didnt-know-how-to-get-to-lfcf
i feel like the tax detail here is just over looked by the interviewer. seems like interviewer wanted a high level answer (technically not correct).
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