[Future-CPA]

Hello Accountants,

This is the finance gal again asking for help again 🙂 This is not related to the CPA but to my job. I am doing a spread on a company in the laboratory supply industry and I have to get different leverage, liquidity ratio, fixedc harges, free cash flow ect… Anyways, on their Cash flow statement, there is an item for “Non-cash payment-in-kind interest accretion”, is this something that you would typically include when calculating EBITDA? Why or why not? Thank you for helping!

[littlenumberrobot]

Sounds more like something you would take out for normalizing the profit. I only have experience with EBITDA in regards to valuations.

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[musicamor]

I would not back out PIK interest since EBITDA is an accrual (non-GAAP) measurement. In my experience, you only back out Depreciation and Amortization. If you desire to look at EBITDA on a non-accrual basis, then, yes, subtract out PIK interest. PIK interest is basically capitalized interest in lieu of paying said interest.

Texas CPA - licensed in 2012!!!

[Future-CPA]

Thank you all. Sorry for the late response, I was out of town. My idea was also that PIK is not added back, so I left it out of the equation. Thanks again for helping!

[Author]

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