Hi Ivan Boesky, any of these discussions helpful:

  • EBITDA Ambiguity- if EBITDA excludes Depreciation and Amortization, why do we subtract D and A from it to get EBIT? I dont really get EBITDA. It is earnings before all that so I assumed that it contained D and A. ... existent thing? Thanks! ebitda ...
  • Which Taxes Should I Add Back to EBITDA? calculations. EBITDA or Earnings Before Interest Tax Depreciation and Amortization will not include the impact ... below. Read More About EBITDA on WSO What Is Earnings Before Interest, Tax, Depreciation & ... interest, taxes
  • EBITDA vs. Operating Cash Flow vs. Free Cash Flow Calculating EBITDA EBITDA = Earnings Before Interest Taxes Depreciation and Amortization EBITDA = Operating ... Income + Depreciation + Amortization = EBIT + Depreciation + Amortization = Net Income + Income Tax ... Expense + Interest
  • P/E vs. EV/EBITDA- Advantages/Disadvantages? Before Interest Tax Depreciation and Amortization. Known as a proxy for free cash flow, EBITDA looks at ... Price to Earnings Multiple (P/E) The price to earnings multiple is calculated one of two ways. Market ... investor is willing to pay $70 for every $1 of earnings. Enterprise Value to EBITDA Multiple (EV
  • Why does a Low EV/EBITDA Multiple Make a Good Acquisition Target? accounts for the entire capital structure- not just equity. EBITDA is Earnings Before Interest Tax ... Depreciation and Amortization. Known as a proxy for free cash flow, EBITDA looks at the earnings generated ... Read that EV / EBITDA multiple = good acquisition candidate...but why is this? What makes high EV ...
  • Levered Free Cash Flow Calculation free cash flow is calculated as Net Income (which already captures interest expense) + Depreciation ... What do you do with the principle part of an amortizing bond when calculating levered free cash ... flow? You have an amortizing bond. The principle part of the amortization payments is not interest, but ...
  • Notes for Technical Interview Questions Amortization- Increase in WC assets + Increase in WC liabilities + Increase in Deferred Tax- Capex- Interest on ... o Using a multiple of earnings like EV / EBITDA or P /E, or a multiple of the company's assets like ... forecast, you find the Free Cash Flow to Firm in each year: + EBIT- Tax on EBIT- Capex + Depreciation ...
  • Need Help With Income Statement / EBITDA etc. Expense) (Possibly R&D)------------------------ EBITDA (Depreciation and Amort) (Possibly ... is: Net income +Interest +Depreciation and Amortization? This makes absolute no sense to me seeing as ... wrong? I figured out of pure logic these EBIT, and EBITDA placements make sense because they are BEFORE ...
  • More suggestions...

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Bloomberg typically reports the "Adjusted EBITDA" figure a Company may provide in their press release / 10-Q. Not sure how CapIQ works.

Find the EBITDA reconciliation in the Company's filings and re-create it yourself. Its important to have a model showing what the Company thinks EBITDA is because the Street, more often than not, takes it on face value so you need it for an idea of what people are looking at. From there create your own reconciliation where you start with "Adjusted EBITDA" and take out inappropriate add-backs. This is your discretion really based on the financial statement notes/management commentary/experience. Your goal should be to take out "one-time, non-recurring" add-backs that are really multiple-time and recurring, but leaving non-cash adjustments such as impairments and eventually come to your own estimate of "Cash EBITDA".

So you should have a model that goes Net Income -> EBITDA -> Adjusted EBITDA -> Cash EBITDA -> Free Cash Flow or whatever else you want to do with it.

Its also helpful to have a separate schedule that tracks the cadence of management's add-backs that tells you what % of Adjusted EBITDA came from add-backs, etc.

Edit: Another thing that may be helpful, if its a debt heavy Company, is to look at the definition of "Bank EBITDA" in their credit agreement. Sometimes this EBITDA differs from Adjusted EBITDA, but its the metric the Company will use when they report covenant compliance with their lenders. A quick way to back into this number is to take their total debt (however defined for covenants) and divide it by the leverage ratio they may report in their 10-Q/K for their covenant. This is somewhat higher level than what you're asking, but still good to know. I've seen people come out with short theses accusing a Company of being in violation of their leverage covenants based on EBITDA derived from "consolidated" financials, but the Bank EBITDA may exclude financials from unrestricted subsidiaries, non-guarantors, foreign subsidiaries, etc...

 

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