Which has the biggest impact on a DCF: Revenue, COGS, or CapEx, and why?

Question

IBPrep · Accepted Answer

CapEx, then COGS, then Revenue. The closer a line item sits to the FCF line (bottom), the bigger its dollar-for-dollar impact. CapEx flows directly into FCF as a subtraction. COGS hits EBIT and then flows to FCF after taxes. Revenue sits at the top, it has to pass through variable costs, gross margin, operating margin, and tax before reaching FCF.

Which has the biggest impact on a DCF: Revenue, COGS, or CapEx, and why?

Answer

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