Importance of EBITDA and FCF. How to derive FCF from EBITDA?

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EBITDA and FCF are important financial metrics for credit analysis. FCF can be derived from EBITDA by adjusting for non-cash expenses and changes in working capital.

EBITDA measures a company's operating performance before interest, taxes, depreciation, and amortization.
FCF measures the cash generated by a company's operations that is available for distribution to investors.
To derive FCF from EBITDA, you need to adjust for non-cash expenses such as depreciation and amortization, and changes in working capital.
The formula for calculating FCF from EBITDA is: FCF = EBITDA - CapEx - Change in Working Capital + Non-Cash Expenses - Taxes.
CapEx refers to capital expenditures, which are investments in property, plant, and equipment.
Working capital is the difference between a company's current assets and current liabilities.
Non-cash expenses include items such as depreciation and amortization.
Taxes are subtracted from EBITDA to arrive at FCF.

Importance of EBITDA and FCF. How to derive FCF from EBITDA?

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