how to calculate EBITDA when interest is embedded in a line item

Hi,

I'm trying to calculate EBITDA bottom up: net income + income tax + interest + D&A

Problem is that in the financials of a company I'm looking at the interest is embedded in a line item called "Interest, bank charges, and foreign exchange". Of course, there is no reference to the notes section about it. Searching for the value, or key words such as "interest" don't yield any results either.

Should I just add back the figure with a "note" in excel?


 

So I'm analyzing a lot of companies in the tech industry. Among the companies, some report their "interest" as ' interest and bank charges', 'interest and other', 'interest and misc income', 'finance costs', 'accretion and finance costs'. Sometimes they report 'interest' with separate line items for 'accretion expense' and 'bank charges' - not sure if I should lump them all as interest with respect to ebitda calc.

Most of the time notes have color on the debt obligations but are super dense to read. Should I just suck it up and get reps in reading through these dense texts trying to pick out info - I've tried it for about 5 companies and couldn't find anything 

btw: I'm not doing a dcf or anything so no need to model out projections - I'm essentially doing comps

 

Maybe a dumb question, but are they public? If so look at what debt they have out. If not do what above poster said...look at what they have outstanding and find comps to see what the int rate is and pick the median maybe? 

 

My 2 cents on this

  • Why are you building EBITDA Bottom up? If the interest line you want to add back is embedded in a line that includes other stuff, you are always going to get to a much more approximate figure to EBITDA if you build from the top to the bottom
  • Are these companies you are analysing highly leveraged? I am just trying to understand whether worrying too much about including "a bit more" at an EBITDA level would be justified, specially if you are updating your comps
  • All in all, I would go with the #1 question in here. You are likely to see the interest expense in % terms for each company in the annual report, just use the principal and multiply it by the cost and it should render an approximate valid figure 
 
Most Helpful

To address your comments

- The reason I'm building it bottom up is because after going through 50+ companies' financials, there were far too many inconsistencies with how they reported their opex among each other: some companies would include interest in opex, some companies would report specific line items as opex of which the same line items others wouldn't, some don't even have an opex section and just report all their expenses in like 10 line items. There are no line items like "SG&A", "R&D", it's all fragmented into individual line items.

- I'm not exactly doing comps, but I'm inputting revenue, net income and EBITDA into excel. Since I have net income I figured it was another push to calculate it bottom up. The structure of my excel worksheet also doesn't really lend itself to doing top down since I only have the three cells to play with (rev, ni, ebitda), meaning I would have to enter like 15+ numbers in one cell

- The companies are really small (average market cap ~10m) where 99% have negative revenues (tech). I don't really know how to respond to the leverage question, but interest is generally less than 10,000 rarely more than100,000

 

Aliquid eaque itaque corrupti. Odit necessitatibus unde maiores quaerat. Molestiae dolorem veritatis eos vel possimus.

Ut ab ipsam et consectetur ipsum blanditiis eum. Et blanditiis voluptatem omnis modi. Sed ipsum nesciunt reiciendis fugit optio ut. Optio dignissimos quia commodi earum quis aliquam nobis.

Impedit animi id cupiditate itaque omnis molestiae doloremque. Occaecati maxime explicabo totam qui delectus. Neque similique quasi accusantium totam recusandae optio. Quo nesciunt quidem eligendi numquam facere. Sed aut rerum nobis quam perferendis veniam rerum voluptatem.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
GameTheory's picture
GameTheory
98.9
6
dosk17's picture
dosk17
98.9
7
DrApeman's picture
DrApeman
98.9
8
CompBanker's picture
CompBanker
98.9
9
kanon's picture
kanon
98.9
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”