Last Friday Insider posted on Billboard Cashflow and how it differs from EBIDTA.  Valuation Expert Paul Wright of Signvalue points out the limits of using Billboard Cashflow for valuation with these comments on last friday’s post:

This is a great discussion of the term Billboard Cash Flow and why most banks don’t want valuations based on this metric.  We don’t use “Billboard” Cash Flow (BCF) in appraisals because nobody agrees on what it means and banks generally don’t want to rely on something with different interpretations of the same term.

Cash Flow and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) generally mean the same thing to everyone including banks, so there is less debate.

EBITDA is our preferred method for valuation because banks use it, buyers use it and it’s less subjective and open to interpretation.  That said, Carson Frost and I still talk in terms of Billboard Cash Flow when negotiating deals for our buyer and seller clients.

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