The COVID pandemic has altered more than our health habits. According to survey results from S&P Global Market Intelligence, it has dramatically changed the way we bank as well.
As we mentioned in our last blog post, 2 Big Reasons Banks Will Be Holding Excess Cash in 2022, banks are seeing more customers interact with their services digitally instead of physically. When the entire country was in lockdown for much of 2020, and later when many people simply weren’t comfortable spending much time in public places, a lot of customers began doing most (if not all) of their banking online.
People are holding onto their money, businesses are in a holding pattern, and banks are seeing a drop in lending activity.
Those are the basic conclusions of a recent 2022 Banking Industry Outlook report released by S&P Global Market Intelligence. Their study analyzes current trends in banking behavior and uses those patterns to try and forecast what we can expect as we move into the new year.
If you spend much time at all reading about business values, you’ll quickly run across the terms “EBITDA” and “cash flow.” In many cases, they seem to be used interchangeably. But can they really be used in the same ways?
In this post, we’ll help you better understand EBITDA vs cash flow. Hopefully, the next time you come across either term, they won’t be confusing.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) has become the standard value metric when it comes time to sell a business.
It is what both buyers and sellers look to in order to determine the value of the company in question. While many factors come into play when a business changes owners, nothing gives everyone involved a better snapshot of that company’s health and value than its EBITDA.
Generally speaking, the higher the EBITDA, the higher the price. Valuation companies like ours apply industry-standard multipliers to the EBITDA of the business being sold to arrive at its current market worth. That’s a simplified explanation, however, and things are rarely that clear cut.
A common phrase you hear in business is “you have to spend money to make money.”
Unfortunately, too many small business owners spend more money than they actually have…all in the name of getting their company off the ground or taking advantage of the next perfect opportunity. They hope that the money they bring in tomorrow will cover the money they’re spending today.
The end result of that kind of business strategy is a lot of debt.
One company owing money to another isn’t a cardinal sin of doing business. It happens all the time. For this post, we want to focus on how much debt is reasonable as a percentage of a company’s overall EBITDA (a common measure of cash flow derived as earnings before depreciation and taxes, depreciation, and amortization).