Don't Be Fooled By EBITDA - EP. 32

Today we’re talking about an incredibly important topic: the
dangers of mistaking EBITDA with Cash Flow.


It’s so tempting when you’re looking at a lot of these small
businesses to buy and you see this metric called EBITDA and you
think, “Hey, this is how much cash I’m going to have distributed
at the end of the year to my investors.” But looks can be
deceiving. 


So in this episode, we want to explain to you why this is so
crucial when evaluating businesses, red flags to look out for,
and how to resolve this potential conflict. We also give some
examples on why exactly it is so important not to mistakes EBITDA
with Cash Flow and how depreciation and amortization can get you
into trouble.


Key Takeaways:


[:46] About today’s topic.


[1:36] What EBITDA is.


[2:21] An example of how EBITDA comes into play when buying a
small business.


[4:47] Another example of why it is crucial to not mistake EBITDA
with Cash Flow.


[6:49] Another way depreciation and amortization can get you into
trouble.


[9:11] How to resolve this potential conflict: look at the Cash
Flow statement!


[11:18] Bottom line: be very careful when you’re evaluating a
small business and you’re just looking at the EBITDA.


[11:38] Particular businesses you want to be especially careful
of.


[12:06] What are some red flags?


Mentioned in this Episode:


EBITDA


Cash Flow


CPA


PNL


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