EBITDA add backs

Question 1

Would you add back one-time restructuring charges?

Answer 1

Yes

Question 2

Would you add back a inventory write up or write down?

Answer 2

Yes

Question 3

Who pushes hardest for upwards revisions to EBITDA?

Answer 3

Sellers and sell-side advisors

Question 4

If calculating the cash flow statement from the other financial statements, would you use the depreciation expense from the income statement or accumulated depreciation from the balance sheet?

Answer 4

Should use the accumulated depreciation from the balance sheet.

The income statement shows depreciation expense. There are at least two instances of when depreciation is not an expense:
1) It becomes a product cost, meaning depreciation becomes a part of cogs, inventory, or work in progress
2) Fixed assets used for R&D are to be expensed to R&D and not depreciation

Question 5

When adding back to EBIT, would you use D&A from income statement or cash flow statement?

Answer 5

Cash flow statement, as income statement only includes explicit depreciation expense, but some depreciation may be embedded in other line items

Question 6

Why do you need to be careful about taking accumulated depreciation from the balance sheet?

Answer 6

Could contains gem accumulated depreciation from acquisitions.