What does cash based multiple vs GAAP based multiple mean?
Can someone explain the fundamental and mathematical difference between calculating a cash based EV/EBITDA multiple vs a GAAP based EV/EBITDA multiple? I heard this being thrown around in a conversation and I am interested to know the difference fundamentally, mathematically and when it's best to use one over the other.
Thanks guys
EBITDA is not defined in GAAP, so its a BS comment
I've seen the use of cash EBIT multiples which simply subtact capex from EBITDA to get to an actual cash generation metric.
I read this is cash based accounting vs gaap based accounting (Accrual) EBITDA. A decent portion of businesses that get acquired in the LMM use cash accounting.
I don't see how it can make sense otherwise... Unless you think you misheard cash flow multiples, not cash based EV/EBITDA..?
Not sure if this is the case in your situation, but I have a software client that does have a "cash-based" EBITDA multiple, which is basically just including all billings rather than just the recognized revenue. Not that the other option is GAAP but perhaps just a misnomer in the question?
Voluptatem molestiae fugit non alias tempora. Id quae laudantium doloribus et porro non inventore.
Adipisci possimus amet et ab est at culpa non. Amet autem nostrum reprehenderit quis error et soluta. Voluptatibus enim molestias nisi similique soluta quia. Ut aperiam omnis iure perspiciatis. Nostrum amet est molestiae nisi eaque.
Possimus laudantium iure natus eos id. Illum ut quidem aut. Non atque ea et cupiditate quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...