Paper LBO from Start to Finish - Private Equity and Investment Banking Interview Prep

[@cameronweber2043]

I enjoy Joshua's LBO case study video, but viewers please note that gross profit minus SG&A is NOT EBITDA; you would not subtract D&A from EBITDA to get to EBIT, but rather add D&A to EBIT to get EBITDA. D&A as an expense is either going to be a part of COGS or a part of Operating expenses (SG&A in this case), depending on the nature of the business.

[@financeinterviewcoach-josh5963]

I'm glad you enjoy the video! In private equity, we typically do not include D&A in SG&A, because it is a non-cash expense that simply represents an asset becoming worth less over time. It is an accounting metric that is not useful for analyzing core profitability other than the fact that it effects taxes. So in PE case studies and PE models, we strip D&A out of SG&A. You are correct that in the financial statements of most public companies, D&A is included in SG&A as that is just what most accountants for public companies are used to doing. So it's just a difference between how PE investors look at SG&A and how accountants for public companies look at SG&A.

[@johnchen32]

Wouldn’t interest expense in year 0 be $0 since year 1 would be the first full year since debt raised

[@kmby3097]

Thanks for explaining

[@mohitkhatkar3976]

Hi thanks for the video! You forgot to add back interest portion to calculate fcff

[@financeinterviewcoach-josh5963]

Thanks for the comment! This is cash interest, so you do not add it back. You only add back PIK (non-cash) interest.

[@lewisepicfootycontent5934]

Thanks for this

[@MichaelScott858]

I would have calculated EBITDA as follows: EBITDA = Revenue - COGS - SG&A + D&A. Why did you assume that COGS and SG&A is pre-D&A?

[@cameronweber2043]

You are correct, Michael Scott

[@ligthcoin]

What shortcut did you use to convert decimals to integers?

[@gusboy20]

Hi there, thanks for your video, really helpful, although I got intrigued about how you added rows using a shortcut that doesn't involve selecting the full row first. Can you let me know? Thanks