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Business Loan Financial analysis

Should You Include Non-Operating Income in EBITDA?

David asks:

Should EBITDA include non-operating income and expenses or not? I have received conflicting information regarding this.

Linda says:

Whether EBITDA should include non operating income and expenses for other types of analysis, I do not have an opinion. As a banker, for projected cash flow analysis, I would include it if you believe it to be recurring over the term of your loan. Heck, even for historical I’d include it because it explains how they could afford to pay their payments in the previous year. That non-operating income was part of the mix for debt payment capacity.

Example for projections

The company has excess office space and is renting it out to another company. If they have no expectations of needing it for their own operations within the time-frame of your loan and plan to continue to rent it out, I would suggest you include it.

If they are planning to expand into that space, do not include it for a recurring cash flow projection.

Do you care about GAAP or about debt repayment capacity?

I guess I am less concerned about the GAAP interpretation than I am getting our best, most reliable estimate of debt repayment capacity. If you are analyzing tax returns for debt repayment, which is most important to you?

Need more on operating and non-operating income?

Our online modules at include two that cover operating income versus other income; Income Statement Basics and Terminology.

Check them out here.

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.