![]() ![]() ![]() These statements include the last two years of federal tax returns, two years of Profit & Loss Statements (P&L) including balance sheet, and interim financials.Īt Viking, we use the net income on the first page of the tax return and only add back items that have been expensed from that net income, e.g. To perform an accurate valuation, we always ask business owners to provide us with appropriate financial statements that include interest expenses. The interest expense line item can consist of interest from loans, lines of credit, or other forms of debt. Interest is a non-operating expense and will differ between individuals. Interest expense is found on a company’s income statement or profit and loss statement and is added back in our valuations. We covered the most common question (what is amortization in EBITDA) above, so let’s consider the complete formula for an EBITDA calculation: An EBITDA analysis helps calculate the business’s cash flow and is essential when comparing similar companies within a single industry during the valuation process. Intangible assets are typically complex compared to fixed assets, but they are included on a company’s balance sheet and have a multi-period useful life.Īs we mentioned above, EBITDA is net income with the addition of any interest, taxes, depreciation, and amortization. Intangible assets are non-physical assets examples include goodwill, copyrights, patents, trade names, customer lists, contracts, and franchise agreements. In EBITDA, Amortization refers to expensing intangible assets. Since the question is so common, we will begin by answering “What is Amortization in EBITDA?” and work our way back to the formula as a whole. While the “EBITD” part of the formula is familiar to most business owners, the “A” gives many people pause. This measure is one of the indicators our firm uses to calculate the value of a business and its future financial performance and earning potential. Business valuations include many moving parts, and understanding specific components of the process can give an entrepreneur an idea of what their business is worth.ĮBITDA is a primary indicator used in determining an accurate and realistic valuation, and it stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. At Viking Mergers & Acquisitions, we consistently express to our clients that performing a valuation of their business is the first step in planning a successful exit strategy. ![]()
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