Don't get Trapped by the Alphabet Soup of Cash Flow Terminology
Manage episode 289473521 series 2864315
Profit, Net Operating Income, EBIT, EBITDA, SDE, Adjusted or Recast Earnings, and Free Cash Flow (which is the most important) - what do they all mean?
I dissect all of these terms and what they mean to business buyers, sellers, lenders, and valuation people.
A few things covered:
- Using EBITDA to calculate return on investment on an asset heavy business is foolhardy.
- Owner compensation is not discretionary, just like your mortgage, utility bills, etc. are discretionary.
- Free cash flow is what it's all about.
And, this is covered in all my books including Chapter 45 in Getting the Deal Done!
John Martinka
Jessica Martinka
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