Sequoia Capital Educational Presentation Deck

How does Revenue convert into Free Cash Flow? Income Statement Revenue COGS Gross Profit S&M R&D G&A Operating Income Interest & Taxes Net Income Statement of Cash Flows Net Income Non-Cash Items Changes in Working Capital Cash from Operations Capex Free Cash Flow SEQUOIA CONFIDENTIAL $500 $150 $350 $100 $100 $50 $100 $30 $70 $70 $30 $20 $120 $70 $50 100% 30% 70% 20% 20% 10% 20% 6% 14% 14% 6% 4% 24% 14% 10% 1. Gross Margin 2. Operating Margin 3. Working Capital 4. Capital Intensity

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