BigDeal #91 Seven Finance Terms You Need To Know To Get Rich
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Sep 5, 2025 Explore seven key finance terms that can boost your wealth-building journey. Discover the significance of free cash flow and working capital in business success. Learn about the power of EBITDA for valuation and how leveraged buyouts can facilitate acquisition. An inspiring success story illustrates how one individual transitioned from employee to business owner in just 90 days using these financial strategies. Financial freedom comes from learning, not luck!
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Free Cash Flow Is King
- Free cash flow (FCF) is the cash left after operating expenses and capital expenditures and is the number to obsess over in a business.
- Cash-flow businesses that get paid first and deliver repeatable products are far more valuable than one-off revenue businesses.
Working Capital Defined
- Working capital equals current assets minus current liabilities and funds day-to-day operations.
- Current assets include cash, inventory, and receivables while liabilities include payables and wages owed.
EBITDA And Valuation Multiples
- EBITDA measures operating profit before interest, taxes, depreciation, and amortization and is the dealmaking gold standard.
- Use EBITDA and SDE multiples to value small businesses, which commonly trade between 2x and 6x profits.