I’m looking at this company, and in their pro forma EBITDA calculation, they back out interest expense but include interest income. Is this common/legit?
No…Unless this is a company where the source of the income is an operating source (thinking more of a mix likge GE with a capital group) I cant see that being reasonable and seems a little shady.
if the interest income is a major part of its ongoing operations (like a financial institution) then yes…but generally, for those companies, interest expense would be treated as an operating item as well. you’d have to elaborate more as to what this company is or does, but without further information, i would disagree with what the company is doing
generally excluded (from non financials), is it stable and recurring - if so may be an argument to include.
Yeah, this isn’t a financial company. Plus they have a fair amount of debt. So from a theoretical perspective, you could say they raised the debt which increased the cash, and now they are counting interest income on the cash, but not counting interest expense on the debt. Which doesn’t make sense to me. thanks