Rookie question but say you have a use of cash showing up on cash flows from financing, but want to categorize that as an EBITDA add back, can you do that? Or are EBITDA add backs only for P&L items?
The reason I ask is that wouldn't that be overstating EBITDA by doing that, since that cash use never actually hit cash flows in the first place?
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Risking stating the obvious, but to add something back, it actually has to be deducted in the first place (or the opposite if something was added to EBITDA, and you're backing it out). There are also pro forma adjustments where you're adjusting based on some hypothetical go-forward company (could be a merger/sale or some cost savings management is expected to achieve. Those PF adjustments all actually hit ebitda, and I can't think of any items in cash flows from financing activities that do (sort of by design with the concept of ebitda)
Doubt this counts for your purposes, but the only example I can think of relates to equity cures in credit agreements where a sponsor is allowed to contribute equity to a portfolio company. In that instance, for covenant calculations the Company is allowed to count the equity contribution as EBITDA (so a positive flow to financing activities that you'd get to add). I've never heard of that being used outside of covenant compliance though.
this sounds like WeWork level of EBITDA calculation.
if you're going to be adding back cash interest and cash capex payments etc as add backs to EBITDA figure why not just ignore everything and (wrongly) say that EBITDA = cash? .
I mean we work add backs at least hit ebitda (opex and g&a). Adding back cash interest makes zero sense because its not in there in the first place. You can't even call it cash because you'd have the wrong sign.
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