Transworld M&A Advisors Helps Define Cash Flow to Determine Business Valuations

The most significant approach to business valuations that determine an ongoing business is cash flow. Transworld M&A Advisors is one such company that helps business owners define the cash flow.


Petersburg, FL -- (ReleaseWire) -- 09/05/2017 --As the popular adage goes, there are three most important factors that determine the value of real estate, and in three cases it's location, location, and location. Similarly, business experts find three most important approaches to business valuations that determine an ongoing business and they are cash flow, cash flow, cash flow.

Given the above, the most important question a prospective buyer can ask while evaluating a business is about the projected cash flow. The expert advisors at Transworld M&A Advisors explained, 'Cash flow is the amount of cash entering and leaving a company, i.e., revenue that the business generates from projects or services. Cash flow is what is available to pay sallies & expenses and help grow the company. Negative cash flow, on the other hand, does not mean a loss but it only means that the cash outflows during a period are higher than the cash inflows during the same period.'

Many sources define the value of the business as a multiple of its cash flow. However, due to the lack of consistency about the way cash flow is defined and calculated, it often becomes difficult for a start-up to define the value of the business. Transworld M&A Advisors help the prospective buyers in defining cash flow.

Seller Discretionary Cash Flow (SDCF) is considered one of the most commonly used measures of cash flow- particularly for owner operated business. This measure is particularly generated by the business for the benefit of the owner, prior to deducting interest expense and income taxes and only after adding back all of the sellers' salary, benefits, and perks.

On the other hand, for larger, investment-grade business, EBITDA, or Earnings Before Interest Taxes, Depreciation and Amortization is considered another commonly used measures. This is more or less similar to SDCG in that the seller's excess compensation, benefits, and perks are added back, but a deduction is made for the fair market compensation and benefits of a hired manager.

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About Transworld M&A Advisors
Transworld M&A Advisors consists of a team of professionals who specialize in mid-market transactions for companies valued between $5 million and $100 million.

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Andy Glasgow

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