I love talking about profits. The abbreviations above are all well known calculation methods for profits. Or cash flow depending on what you are looking for. I refer back to Pablo’s theorem of the difference between the two: “net profit is an opinion, cash flow is a fact”. This is to say that net profit is a number generally tainted with accounting principles, and subject to debate, while cash flow either exists or it doesn’t. Semantics. In this case the opinion is just as useful as the fact unless of course any numbers are substantially misrepresented.

Unfortunately most businesses have some kind of debt on the statement. Buyers don’t always know what to do when they see it. When I say statement I mean financial statement and by that I mean balance sheet. Most companies have some sort of loans, liabilities, or other types of contingencies on the balance sheet. It comes with the territory. This is what happens when you own a business. You are almost certainly going to have some liabilities on the balance sheet. But what effect do those liabilities have in a sale of the business? In fact the effect is dramatic and may well interfere with or even break up the deal. So how to buy a business what has debt or what to do when you encounter one?