Interviewer view · keep this screen to yourself

Same EBITDA, very different cash

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

Two fictional companies each report EBITDA of USD 100 million. A mobile operator in Southeast Asia has depreciation of 45 and spends 50 a year on its network. A software firm has depreciation of 5, spends 5 a year on equipment, and its working capital falls by 5 because customers pay a year in advance. Tax is 20 percent for both (illustrative). Which business produces more cash?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Free cash flow = EBIT x (1 minus tax) + depreciation minus capex minus the increase in working capital (this comes from the question: cash, not profit)
- EBIT and NOPAT for each company
- Add back depreciation, subtract capex and working capital
- Free cash flow as a share of EBITDA

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Operator EBIT
What a strong candidate does: EBITDA 100 minus depreciation 45.
Operator EBIT (USD millions): 100 - 45 = 55
Step 2: Operator NOPAT
What a strong candidate does: Keep 80 percent after tax.
Operator NOPAT (USD millions): 55 × 0.8 = 44
Step 3: Operator free cash flow
What a strong candidate does: NOPAT 44, plus depreciation 45, minus network capex 50.
Operator free cash flow (USD millions): 44 + 45 - 50 = 39
Step 4: Software EBIT and NOPAT
What a strong candidate does: EBITDA 100 minus depreciation 5 is 95; keep 80 percent.
Software NOPAT (USD millions): (100 - 5) × 0.8 = 76
Step 5: Software free cash flow
What a strong candidate does: NOPAT 76, plus depreciation 5, minus capex 5, plus 5 because working capital fell.
Software free cash flow (USD millions): 76 + 5 - 5 + 5 = 81
Step 6: Compare
What a strong candidate does: Free cash flow as a share of EBITDA.
Software free cash flow divided by operator free cash flow: 81 ÷ 39 = 2.08

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The software firm produces about twice the cash: USD 81 million of free cash flow against 39 million, from the same USD 100 million of EBITDA. The reason is that the operator must spend 50 a year to keep its network running, while the software firm needs little equipment and its customers pay in advance. This means that a buyer paying the same multiple of EBITDA for both would be overpaying for the operator. The risk on the software side is that the advance payments reverse if growth stops. As a next step, compare capex with depreciation over five years for both.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.