Why EBITDA Doesn’t Spell Cash Flow and What Does?

Introduction

EBITDA, though popular, is an imperfect measure of cash flow and can mislead lenders in credit decisions. Defining cash flow has been a challenge, with contenders like traditional cash flow and operating cash flow. EBITDA gained prominence due to its popularity in the investment community, but it's not accurate for assessing repayment ability, leading to potential disappointment for bankers and investors. This session addresses the flaws in relying on EBITDA and emphasizes the importance of better cash flow tools. Through examples and a case study, participants will learn why EBITDA falls short and explore alternatives such as Operating Cash Flow, Net Cash after Operation, Net Cash Income, Cash after Debt Amortization, and Free Cash Flow. Gain insights to safeguard credit strength and enhance repayment accuracy.

Areas Covered

Major Topics Covered in this webinar include:

• Definition of EBITDA
• Origins of EBITDA—its relationship to traditional cash flow (TCF)
• Problems with TCF, EBITDA, and adjusted EBITDA
• SEC crackdown on EBITDA and adjusted EBITDA
• Alternatives to EBITDA—Operating Cash Flow, Net Cash after Operation, Net Cash Income, Cash after Debt Amortization, and Free Cash Flow.
• Case Study

About Speaker

Martin J. "Dev" Strischek, a credit risk expert, advises financial institutions through Devon Risk Advisory Group. With diverse experience, he instructs at various banking schools and has authored over 200 articles on credit risk management. His insights shape the industry.