Why EBITDA Doesn't Spell Cash Flow and What Does?

EBITDA is widely treated as a measure of cash flow, but it is not an accurate one. Bankers and investors who rely on it to judge repayment ability can overstate the cash a borrower really has.

This 90-minute webinar on EBITDA vs cash flow explains where EBITDA came from, how it relates to traditional cash flow, and why it falls short. You'll then look at better alternatives, operating cash flow and free cash flow, and learn how to convert EBITDA into free cash flow for measuring debt repayment capacity.

Examples and a case study show the differences between EBITDA and free cash flow in practice.

• Define EBITDA and explain why it is so widely used
• Explain EBITDA's shortcomings as a measure of cash flow
• Use more accurate cash flow measures of debt repayment ability
• Convert EBITDA into free cash flow
• Compare EBITDA and free cash flow using case studies

• Definition of EBITDA
• Origins of EBITDA and its relationship to traditional cash flow (TCF)
• Problems with EBITDA
• Alternatives to EBITDA: operating cash flow and free cash flow
• Examples and a case study

EBITDA assumes a borrower will pay lenders before paying taxes and before funding the working capital and fixed assets needed to grow sales. As a result, lenders who lean on it tend to overstate the cash a borrower has and understate the chance of default.

This session suits credit analysts and managers, loan review and work-out officers, commercial and senior lenders, credit risk managers, chief credit officers, bank directors and executives.

• 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

A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek principal of Devon Risk Advisory Group based near Atlanta, Georgia.  Dev advises, trains, and develops for financial organizations risk management solutions and recommendations on a range of issues and topics, e.g., credit risk management, credit culture, credit policy, credit and lending training, etc.  Dev is also a member of the Financial Accounting Standards Board’s (FASB’s) Private Company Council (PCC).  PCC’s purpose is to evaluate and recommend to FASB revisions to current and proposed generally accepted accounting principles (GAAP) that are more appropriate for privately held firms.  He also serves as the PCC’s representative to FASB’s Credit Losses Transition Resource Group supporting the new current expected credit loss (CECL) standard to be implemented in fiscal year 2019 for public companies and 2020 for private firms.

The 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, he was chief credit officer for Barnett Bank’s Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, his experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor.

A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, Dev earned his M.B.A. from the University of Hawaii. Mr. Strischek serves as an instructor in several banking schools, including the Stonier Graduate School of Banking, and the Southwest Graduate School of Banking. 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.

Mr. Strischek has written some 200 articles on credit risk management, financial analysis and related subjects, and he is the author of Analyzing Construction Contractors and instructor of  a contractor analysis workshop. A past national chair of RMA and former RMA Florida Chapter president, Dev has consulted on credit risk issues with banks in Morocco, Egypt, and Angola through the US State Department’s Financial Service Volunteer Corps (FSVC).