Which item is not reflected in EBITDA but can cause a company to be cash-flow negative and potentially bankrupt?

• A. Capital Expenditures
• B. Interest Expense
• C. One-Time Charges
• D. Depreciation

Answer: (A)

Capex, or capital expenditures, is a real cash outlay for buying or upgrading fixed assets. EBITDA shows earnings from core operations before financing and investing activities, and it excludes actual cash investments in assets. So a company can post positive EBITDA while still burning cash if it spends heavily on capex. If these cash outflows aren’t offset by cash from operations or external financing, the company can run down its cash reserves, potentially leading to liquidity problems or bankruptcy.

Depreciation, by contrast, is a non-cash expense that reduces earnings but doesn’t require an actual cash outlay in the period, so it doesn’t drive negative cash flow on its own. Interest expense is a cash obligation, but EBITDA excludes financing costs by design, and the question focuses on an item not reflected in EBITDA that can deplete cash; the real cash drain from investing activities is capex. One-time charges can hurt earnings but aren’t ongoing cash outflows, so they’re not as directly tied to sustained negative cash flow as capex.