easy · Investment Banking valuation-core

Why is 'EBITDA' often criticized by valuation practitioners as a proxy for cash flow?

1. Because it is a levered metric that already subtracts interest payments from revenue.
2. Because it is always higher than the actual total revenue generated by the firm.
3. Because it includes non-operating income items, such as one-time gains recognized from asset sales.
4. Because it ignores the cash required for capital expenditures and working capital changes.

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