Why EBITDA Doesn’t Spell Cash Flow and What Does

Course Description:

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.

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

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.

Areas Covered in the Webinar:

  • 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

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

Our Speaker

Dev Strischek

Dev Strischek, A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Dev is principal of Devon Risk Advisory Group and engages in consulting, speaking and training on a wide range of risk, credit, and lending topics. As former SVP and senior credit policy officer at SunTrust Bank, Atlanta, he was responsible for developing, implementing, and administering credit policies for SunTrust's wholesale lines of business--commercial, commercial real estate, corporate investment banking, capital markets, business banking and private wealth management. He also spent three years as managing director and credit approver in SunTrust's Florida commercial lending and corporate investment banking areas, respectively. Prior to SunTrust, Dev was chief credit officer for Barnett Bank's Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, Dev's experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor in Hawaii, Missouri, and Florida. A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, he earned his M.B.A. from the University of Hawaii. Dev serves as an instructor in the Stonier Graduate School of Banking, the Southwestern Graduate School of Banking, and the American Bankers Association's (ABA) Commercial Lending. His school, conference, and workshop audiences have included participants drawn from the ABA, RMA, OCC, Federal Reserve, FDIC, FFIEC, SBA, the Institute of Management Accountants (IMA) and the AICPA. Dev has written about credit risk management, financial analysis and related subjects for the ABA's Commercial Insights, the Risk Management Association's RMA Journal, and other business professional journals. He is the author of Analyzing Construction Contractors and its related RMA workshop. A past national chair of RMA and former Florida Chapter president, Dev serves as a member of the RMA Journal's advisory board, and an ex-officio board member of the Florida and Atlanta RMA chapters. He also serves on the advisory board of the Atlanta Chapter of the Professional Risk Managers' International Association (PRMIA), and he has consulted on credit risk issues with banks in Morocco, Egypt, and Angola through the US State Department's Financial Service Volunteer Corps (FSVC). Finally, he was a member of the Financial Accounting Standards Board’s Private Company Council which recommends simpler versions of generally accepted accounting principles for use by privately held companies.
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