The Alternative Investor

Don't Be Fooled By EBITDA - EP. 32


Listen Later

Today we’re talking about an incredibly important topic: the dangers of mistaking EBITDA with Cash Flow.


It’s so tempting when you’re looking at a lot of these small businesses to buy and you see this metric called EBITDA and you think, “Hey, this is how much cash I’m going to have distributed at the end of the year to my investors.” But looks can be deceiving. 


So in this episode, we want to explain to you why this is so crucial when evaluating businesses, red flags to look out for, and how to resolve this potential conflict. We also give some examples on why exactly it is so important not to mistakes EBITDA with Cash Flow and how depreciation and amortization can get you into trouble.


Key Takeaways:

[:46] About today’s topic.

[1:36] What EBITDA is.

[2:21] An example of how EBITDA comes into play when buying a small business.

[4:47] Another example of why it is crucial to not mistake EBITDA with Cash Flow.

[6:49] Another way depreciation and amortization can get you into trouble.

[9:11] How to resolve this potential conflict: look at the Cash Flow statement!

[11:18] Bottom line: be very careful when you’re evaluating a small business and you’re just looking at the EBITDA.

[11:38] Particular businesses you want to be especially careful of.

[12:06] What are some red flags?


Mentioned in this Episode:

EBITDA

Cash Flow

CPA

PNL


For More on The Alternative Investor, Check Out:

TheAlternativeInvestorShow.com

Hosted on Acast. See acast.com/privacy for more information.

...more
View all episodesView all episodes
Download on the App Store

The Alternative InvestorBy Brad Johnson

  • 4.9
  • 4.9
  • 4.9
  • 4.9
  • 4.9

4.9

195 ratings


More shows like The Alternative Investor

View all
Bloomberg Surveillance by Bloomberg

Bloomberg Surveillance

1,200 Listeners

Insights Now by Dr. David Kelly and Gabriela Santos, J.P. Morgan Asset Management

Insights Now

94 Listeners

Masters in Business by Bloomberg

Masters in Business

2,174 Listeners

Exchanges by Goldman Sachs

Exchanges

992 Listeners

Odd Lots by Bloomberg

Odd Lots

1,789 Listeners

Capital Allocators – Inside the Institutional Investment Industry by Ted Seides – Allocator and Asset Management Expert

Capital Allocators – Inside the Institutional Investment Industry

804 Listeners

Thoughts on the Market by Morgan Stanley

Thoughts on the Market

1,267 Listeners

Dry Powder: The Private Equity Podcast by Hugh MacArthur, Bain & Company

Dry Powder: The Private Equity Podcast

146 Listeners

Morning Brew Daily by Morning Brew

Morning Brew Daily

2,969 Listeners

The Weekly Take from CBRE by CBRE

The Weekly Take from CBRE

156 Listeners

The Memo by Howard Marks by Oaktree Capital Management

The Memo by Howard Marks

416 Listeners

The Walker Webcast by Willy Walker

The Walker Webcast

152 Listeners

Business Breakdowns by Colossus | Investing & Business Podcasts

Business Breakdowns

353 Listeners

The Credit Edge by Bloomberg Intelligence by Bloomberg

The Credit Edge by Bloomberg Intelligence

26 Listeners

The Markets by Goldman Sachs

The Markets

70 Listeners