Cash Flow Rule of Thumb

Nov 04

adminBusiness Cash Flow, EBITDA, estimate, Rule of Thumb No Comments

Cash flow can be estimated by the financial measurement known as EBITDA. EBITDA is used as a rule of thumb for cash flow. It stands for earnings before interest, taxes, depreciation and amortization. Essentially, it estimates cash flow by trying to add back all non-cash expenses to a firm s net income. However, since it doesn t take into account capital expenditures or changes in net working capital, it should be used only as an estimate and works best with companies that are in a steady-state.

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There have been many instances in my personal and professional life that a rule of thumb was simply all I needed, but couldn’t find any. I have begun to contribute all of the rules of thumb that I have used in my career, thus the content is dominated by business topics in general and venture capital and valuation rules of thumb in particular. Therefore, I hope you will help me build this collection of Rules of Thumbs from which everyone can benefit.

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