Walk EBITDA Down to Debt Capacity
Move from EBITDA to free cash flow and debt service capacity in a buyout screen.
decision-trail stat-tile-trio Debt screen $40 million EBITDA, 4.75x debt quote, $8 million maintenance capex, and a customer mix shift that may stretch receivables. The debt number is not safe until the cash bridge says it is safe. LBO cash bridge EBITDA -> cash conversion -> downside cushion Walk the operating earnings down to debt-service capacity before you accept a leverage quote. Shortcut Debt / EBITDA looks marketable Debt becomes a conclusion, not an input. The amount of debt a business can carry is constrained by cash under stress, not by the highest multiple a lender will quote. 01 EBITDA 02…
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