TOOL E13
The purpose of this tool is to help you calculate and/or project the separate cash drivers, financial charges and debt service capacity from raw accounting data in the Income Statement and Balance Sheet when no reliable cash flow statement is available.*
| Cash Driver | Cash Available For Debt Service |
|---|---|
| Profit | EBITDAR** (adjust for Minority Interest) +/- Change in balance sheet provisions +/- Any non-cash (other than provisions) or non-recurring items dealt with in I/S before EBITDA. Be clear on what accounting concepts are being used to calculate EBITDA. We are aiming to identify Sustainable EBITDA Cash taxes paid |
| ACC | (WC) +/- Changes in net working capital requirement (asset conversion cycle), i.e. changes in Receivables, Inventory, and Payables (Change in Current Assets excl. cash and marketable securities – Change in Current Liabilities (excl. short term debt) |
| Capex | Mandatory or Total Gross (Net) capital expenditure / capitalised costs |
| Cash Available For Debt Service | |
|---|---|
| Cost of Debt | Gross Interest + Capitalised Interest + Fees + Operating Lease Payments |
| Scheduled Repayments | + Current Maturities of Long Term Debt and Finance Leases |
| Cost of Equity | + Dividends / Drawings Paid |
* Where there is a reliable cash flow statement use the numbers from that report to calculate the separate cash drivers.
** Caution: EBITDAR is not a formal GAAP measure. EBITDA(R) is not calculated the same in every GAAP. The different application and/or interpretation of accounting rules used by one firm versus another – or one auditor versus another – means that the information content of “EBITDAR” is not the same across peers and/or geographic boundaries. For example, the different treatment of R&D expenses in accordance with US GAAP and IFRS mean that EBITDA metrics are not comparable unless such differences have been taken account of analytically.
Note that some companies and/or analysts derive a measure of operating cash flow by using Net Profit or EBIT as a starting point instead of EBITDA(R).
