What is the actual useable EBITDA from a tax return

by a searcher from Oregon State University

8 months ago

How does one determine a REAL WORLD cash flow from the tax return. Is there a universal line item or formula to use from the 1120?

Assuming I'm using significant leverage, what is really there to support debt payments? Thus far I've heard from different sources to use M1-1, M1-10, or 1120 "taxable income" as the starting point for addbacks. Would love to get some alternative perspectives from the financiers on the forum.

For context, Im coming from the public markets, so have only ever used financial statements to do analysis. I'm trying to be able to understand how it translates to the tax returns that banks utilize.

3 likes
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19 comments

investor from University of Rochester

Love the dialog - thanks to all for sharing

6 months ago | like reply | 0 likes

searcher from Oregon State University

After talking to a lot (too many) lenders the last week. I think the most common view is actually EBIDA (not a typo: EBITDA minus an assumed amount of taxes) as the number you can use to service debt and that underwriters will care about for coverage ratios. And then adjusted EBITDA for the valuation itself, with potential for providing material information if it initially comes back low.

8 months ago | like reply | 1 like

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