Module IV· Cash FlowBasic
Question
How do you calculate the 'Cash Flow Available for Debt Repayment' (CFADR) in an LBO short form?
Answer
What
Cash Flow Available for Debt Repayment — the standard cash-flow driver in an LBO short form.
```
EBITDA
− D&A → EBIT
× (1 − tax rate) → NOPAT
+ D&A (added back)
− Capex
− Δ Working Capital
− cash taxes
= Cash Flow before Debt Service
− mandatory amortization
= CFADR (available for the sweep)
```
Rule of thumb
CFADR ≈ 50-70% of EBITDA in the middle market.
Pitch tip
'What drags CFADR down the most?' → Capex (15-25% of EBITDA), cash taxes (10-15%), WC (5-10%).