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

On-Demand Schedule Thu, February 29, 2024 - Thu, March 07, 2024
Duration 60 Mins
Level Basic & Intermediate
Webinar ID IQW23F0625

Major Topics Covered in this webinar include:

  • Definition of EBITDA
  • Origins of EBITDA—its relationship to traditional cash flow (TCF)
  • Problems with TCF, EBITDA, and adjusted EBITDA
  • SEC crackdown on EBITDA and adjusted EBITDA
  • Alternatives to EBITDA—Operating Cash Flow, Net Cash after Operation, Net Cash Income, Cash after Debt Amortization, and Free Cash Flow.
  • Case Study

Overview of the webinar

The challenge here is to explain what we mean when we say cash flow. In recent decades bankers have seen several top contenders for the cash flow definitional sweepstakes—traditional cash flow, operating cash flow, and EBITDA. The ascendant definition has been EBITDA, largely because of its popularity with the investment community, and its use there has given it a certain cache among corporate bankers and commercial lenders.

EBITDA is a popular measure of cash flow, but it is not accurate, and bankers and investors who rely on it as a reliable indicator of repayment ability will be deeply disappointed. The lender needs to understand those fatal flaws so that they do not jeopardize the repayment of what otherwise appears to be a strong credit.

The session includes several examples and a case study to illustrate:

  • Why EBITDA is flawed and how to apply better cash flow tools that actually measure repayment ability from cash flow.
  •  
  • Discover the alternatives to EBITDA including Operating Cash Flow, Net Cash after Operation, Net Cash Income, Cash after Debt Amortization, and Free Cash Flow.

Who should attend?

This webinar has something to offer for everyone in the financial services industry, including

  • Credit Analysts & Credit Approvers
  • Commercial Bankers and their Managers
  • Chief Credit Officers
  • Loan Review Officers
  • Senior Lenders
  • Certified Public Accountant 
  • Commercial Underwriters
  • Loan Committee Members
  • Bank Directors, Finance Directors
  • Executive Management, Non-Bank Credit Managers
  • Bookkeepers & Accountants & Tax Preparers
  • Finance Professionals who want to understand why EBITDA is flawed and how to apply better cash flow tools.

Why should you attend?

Most bankers acknowledge that construction lending is riskier than other types of commercial lending:

  • Repayment ability depends on successful completion of the construction before the project can generate cash flow from the sale of the finished property, from rental or lease of the real estate, or from permanent take-out refinancing
  • During the construction period, the collateral is literally work-in-progress, and often the guarantors do not have sufficient outside net worth or income to pay off the loan

Faculty - Mr.Dev Strischek

A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek is 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. Dev is 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, Mr. Strischek 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 in Hawaii, Missouri, and Florida. A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, he earned his M.B.A. from the University of Hawaii. Mr. Strischek serves as an instructor in RMA’s Florida Commercial Lending School, the American Bankers Association's (ABA) Advanced Commercial Lending School and ABA’s  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. Recent conference presentations have ranged from the new GAAP accounting principles for revenue recognition, lease capitalization, and current expected credit losses (CECL) to commercial real estate concentration management, from character in lending to leveraged lending, from credit risk management techniques and tools to why EBITDA doesn’t spell cash flow. Mr. Strischek has written over 200 articles about credit risk management, financial analysis and related subjects for the ABA’s Commercial Insights, the Risk Management Association’s RMA Journal, and other business professional journals. He is the author of Analyzing Construction Contractors and its related RMA workshop. A past national chair of RMA and former RMA Florida Chapter president, Dev serves as a member of the RMA Journal’s advisory board, and an ex-officio board member of the Florida and Atlanta RMA chapters. He also serves on the advisory board of the Atlanta Chapter of the Professional Risk Managers’ International Association (PRMIA), and he has consulted on credit risk and policy issues with banks in Morocco, Egypt, and Angola through the US State Department’s Financial Service Volunteer Corps (FSVC).

 

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