How can a company show strong EBITDA but be cash-flow negative due to CapEx?

How to answer

EBITDA excludes CapEx entirely — but CapEx is a real cash outflow that's necessary to maintain (maintenance CapEx) or expand (growth CapEx) the business. A capital-intensive company like a steel mill, telecom, or semiconductor fab can show $500M of EBITDA while spending $700M on CapEx, ending the year cash-negative. Same goes for 'maintenance CapEx-heavy' businesses where equipment must be regularly replaced. This is why analysts use EBITDA − CapEx (or 'Free Cash Flow before working capital') as a quick proxy for cash generation when comparing capital-light to capital-heavy businesses. EBITDA is great for capital-light SaaS or services businesses but misleading for asset-heavy industries — always pair it with CapEx and FCF when evaluating quality of earnings.