2023 - Why EBITDA Doesn't Spell Cash Flow and What Does

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 EBITDA—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