Financial Glossary
Cash EBITDA
Cash EBITDA modifies conventional EBITDA by stripping out non-cash revenue and accrual timing effects, such as changes in deferred revenue, to approximate the operating cash a business truly produces. While standard EBITDA starts from accrual earnings and adds back interest, taxes, depreciation, and amortization, cash EBITDA goes further to remove items that inflate earnings but never hit the bank. The result is a measure closer to operating cash flow than to accounting profit.
Problem & Application
Subscription and SaaS businesses that bill annually upfront can show strong EBITDA while sitting on large deferred revenue balances, so cash EBITDA helps lenders and buyers see what the operation actually collects. For owner-operated companies pursuing a loan or sale, knowing the gap between EBITDA and its cash-adjusted version prevents overstating earning power. It also sharpens covenant discussions where a lender may define EBITDA differently than the income statement does.
In Short
Cash EBITDA bridges accrual earnings and real cash generation, exposing how much of reported profit is collectible. It is especially useful where billing and revenue recognition diverge sharply.