EBITDA is a popular measure of cash flow, but it is not accurate, and bankers and investors who rely on it as a reliable indicator of repayment ability will be deeply disappointed. This session will explain why EBITDA does not measure cash flow and what more accurate measures are available. The session also includes several examples and a case study to illustrate why EBITDA is flawed and how to apply better cash flow tools.
WHY SHOULD YOU ATTEND?
Reliance on EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) as a measure of cash flow is misplaced because it presumes that borrowers will pay lenders before paying their taxes, expanding their working capital assets, and fixed assets to support sales growth, among other things. Bankers and investors who rely on it as a reliable indicator of repayment ability will overestimate available cash flow and underestimate the risk of default.
This session will explain why EBITDA does not measure cash flow and what more accurate measures are available.
AREA COVERED
- Definition of EBITDA
- Origins of E
- BITDA—its relationship to traditional cash flow (TCF)
- Problems with EBITDA
- Alternatives to EBITDA—Operating Cash Flow and Free Cash Flow
LEARNING OBJECTIVES
- Define and explain why EBITDA is used and why it is so popular
- Explain EBITDA’s shortcomings as an accurate, reliable measure of cash flow
- Offer more accurate debt repayment measures of cash flow, including how to convert EBITDA into free cash flow for measuring debt repayment ability
- Demonstrate differences between EBITDA and free cash flow in case studies
WHO WILL BENEFIT?
- Credit Analysts
- Credit Managers
- Loan review officers
- Work-out officers
- Commercial lenders
- Credit Risk Managers
- Chief Credit Officers
- Senior Lenders
- Senior Lending Officer
- Bank Director
- Chief Executive Officer
- President
- Board Chairman
Reliance on EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) as a measure of cash flow is misplaced because it presumes that borrowers will pay lenders before paying their taxes, expanding their working capital assets, and fixed assets to support sales growth, among other things. Bankers and investors who rely on it as a reliable indicator of repayment ability will overestimate available cash flow and underestimate the risk of default.
This session will explain why EBITDA does not measure cash flow and what more accurate measures are available.
- Definition of EBITDA
- Origins of E
- BITDA—its relationship to traditional cash flow (TCF)
- Problems with EBITDA
- Alternatives to EBITDA—Operating Cash Flow and Free Cash Flow
- Define and explain why EBITDA is used and why it is so popular
- Explain EBITDA’s shortcomings as an accurate, reliable measure of cash flow
- Offer more accurate debt repayment measures of cash flow, including how to convert EBITDA into free cash flow for measuring debt repayment ability
- Demonstrate differences between EBITDA and free cash flow in case studies
- Credit Analysts
- Credit Managers
- Loan review officers
- Work-out officers
- Commercial lenders
- Credit Risk Managers
- Chief Credit Officers
- Senior Lenders
- Senior Lending Officer
- Bank Director
- Chief Executive Officer
- President
- Board Chairman
Speaker Profile
A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek principal of Devon Risk Advisory Group based near Atlanta, Georgia. Dev advises, trains, and develops for financial organizations risk management solutions and recommendations on a range of issues and topics, e.g., credit risk management, credit culture, credit policy, credit and lending training, etc. Dev is also a member of the Financial Accounting Standards Board’s (FASB’s) Private Company Council (PCC). PCC’s purpose is to evaluate and recommend to FASB revisions to current and proposed generally accepted accounting principles (GAAP) that are …
Upcoming Webinars
Managing Difficult Employee Conversations
I-9 Audits: Strengthening Your Immigration Compliance Strat…
Dealing With Difficult People In Life & Work
Predictive Accounting: Driver-Based Budgeting And Rolling F…
Pay Equity Changes for 2024! What Employers Need to Know to…
Leader Branding: How to Communicate with Confidence to Attr…
Project Management for Non-Project Managers - How to commun…
Design Verification, Validation and Testing for Medical Dev…
Data Integrity and Privacy: Compliance with 21 CFR Part 11,…
FFIEC BSA/AML Examination Manual: What Compliance Officers …
Why EBITDA Doesn't Spell Cash Flow and What Does
Harassment, Bullying, Gossip, Confrontational and Disruptiv…
Employee or Independent Contractor – U.S DOL Announces 2024…
How to Survive an Emotionally Toxic Workplace
Best Practices in Complaint Management for Regulatory Compl…
Human Factors Usability Studies Following ISO 62366 and FDA…
Ensuring Safe and Effective Pharmaceutical Products: A Comp…
Gossip-Free: Leadership Techniques to Quell Office Chatter
Updated Metro 2®, e-OSCAR and the New Tougher FCRA/CFPB Com…
Embracing Diversity and Inclusion in Talent Acquisition
Form W-9 Compliance to Avoid Penalties: TIN Verification, B…
Tattoos, hijabs, piercings, and pink hair: The challenges …
Understanding and Analyzing Financial Statements
Divorce, Adoption and Other Special Tax Topics
Design History File (DHF), the Device Master Record (DMR) a…
With Mandatory Paid Leave Gaining Ground Is It Time To Do A…
Setting up Quality System for FDA Regulated Products: Tips …
Is Your Culture Working For or Against Your Success? If You…
Marketing to Medicare or Medicaid Beneficiaries - What You …
The Five Cs Of Commercial Credit: The Basic Elements Of Cre…
Sunshine Act Reporting - Clarification for Clinical Research
Documenting Misconduct that Will Stand Up in Court
Stress, Change And Team Resilience Through Humor: An Intera…
FDA Regulation of Artificial Intelligence/ Machine Learning
Managing Toxic & Other Employees Who have Attitude Issues
Excel - Lists and Tables - A Beginner's Guide to Managing L…
Pharma 4.0: Next Generation Technology Approach to GxP Prod…
Patient Gifts, Discounts and Freebies: What You Can and Can…
Managing Complex Projects - Project Management
All About Civility - Eliminating a Culture of Gossip Rumors…
From Challenges to Compliance: Understanding Dietary Supple…
Improving Employee Engagement & Retention Through Stay Inte…
How To Conduct An Internal Harassment And Bullying Investig…