Eli5 – What is the difference between a businesses annual cash flow vs. EBITDA?

Question

I am looking to buy an existing business. Cash flow is $60k but EBITDA is $40k. What’s the difference?

In: 1

Answer 1

In this case you’d have to look at the cash flow statement to determine why cash flow is higher than EBITDA, could be loan proceeds, a decrease in accounts receivable from beginning to end of year, an increase in a/p. In other words balance sheet changes that aren’t reflected in earnings.