Operating Cash Flow
Question:
I am confused about operating cash flow vs cash flow from operations. Shouldn't they be the same?
If I take an income statement and calculate OCF:
Ebit + D/A - Taxes
I get a different result than the line "cash flow from operations" on the statement of cash flows.
My thought is that on the cash flow statement we start with Net Income which already includes interest expense/income. BUT when simply calculating OCF with the above formula, don't we neglect this interest expense/income by using EBIT, all we do is account for tax shield. Am I completely going nuts?!
And finally, is Levered FCF= cash flow from ops - capex ?
Would appreciate any help/explanation/clarification, thanks!
BUMP. Hmm something I want to add:
Wouldn't the OCF formula not equal cash flow from ops on the statement of cash flows, becauce OCF formula doesn't account for the fact that some revenue may be cash but a lot maybe be in accounts receivable?
Is that it?
EBITDA is earnings before interest and taxes. By deducting taxes again, you're excluding it twice.
As you alluded to, EBITDA doesn't take into account changes in net working capital (which, depending on the definition, is generally accounts receivables + inventory - payables).
There are other cash / non-cash items that EBITDA may / may not be picking up: pension funding net of expense, cash vs PIK interest, etc.
Yes, levered FCF = OCF - Capex
The income statement presents the earnings of the company within the rules of accounting. Some of the revenues and expenses are 100% real, others are accounting creations which are designed to more accurately present the financial performance of the business. (I'd suggest reading up on this...i.e. why capex is not on the income statement). So anything off the income statement isn't going to tie to actual cash in the bank, so to speak.
The statement of cash flows, however, presents actual cash in/out-flows from the business.
http://www.wallstreetoasis.com/forums/ebitda-vs-operating-cash-flow-vs-…
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