Learn / Accounting for buyers Go to Overview 1. The statements as a buyer reads them 2. Cash conversion and capex, Pro 3. Net working capital and why buyers care, Pro 4. Quality of earnings and adjusted EBITDA, Pro 5. The working capital peg and price adjustments, Pro 6. Net debt and debt-like items, Pro 7. Purchase accounting in an LBO, Pro Flashcards, 0 of 15 reviewed Basic quiz Advanced quiz Terms Accounting for buyers
0 of 7 lessons
0 of 15 cards The three statements read the way a fund reads them: what EBITDA leaves out, how much of it turns into cash, why working capital moves the price, and how quality of earnings, the peg, debt-like items, and purchase accounting change what you actually pay.
A Advanced4 lessons 4 Quality of earnings and adjusted EBITDA The seller's adjusted EBITDA is a sales document. The quality of earnings report decides which add-backs are real, and every dollar it cuts comes off the price at the multiple. 11 min 5 The working capital peg and price adjustments The headline price assumes a normal level of working capital. The peg sets that level, and the closing adjustment pays the difference so neither side can game the closing date. 10 min 6 Net debt and debt-like items Between the enterprise value and the check the seller receives sit borrowings, cash, and a list of obligations that act like debt. Each one is negotiated, and each one moves the equity price dollar for dollar. 11 min 7 Purchase accounting in an LBO After the deal closes, the target's balance sheet is rebuilt at fair value: assets written up, a deferred tax liability set up, and goodwill as the plug. It changes reported earnings, and in a stock deal it does not change cash. 12 min Q Advanced quiz 10 questions, 80% passes