CFADS

CFADS

Short definition

CFADS is cash that can be used to pay interest and principal. A practical bridge is EBITDA less cash tax, mandatory maintenance capex and working-capital need. There is no universal formula; the facility defines it.

Detailed explanation

Lenders are paid in cash, not in accounting profit. EBITDA is accrual; CFADS approaches cash paying power. Project finance often locks a tighter calculation; in corporate facilities “adjusted EBITDA” must not be treated as CFADS.

If maintenance and growth capex are not split, CFADS is either optimistic (maintenance forgotten) or overly conservative (all capex deducted). The ΔNWC definition may not match the contract’s “permitted working capital”.

Why it matters for the CFO

CFADS is the DSCR numerator. Debt capacity is first a safe annual debt-service amount, then a stock of debt given rate, tenor and amortisation. Quoting capacity off EBITDA ignores tax, inventory and maintenance cash.

How it is calculated

CFADS ≈ FAVÖK − Nakit vergiler − Zorunlu bakım yatırımı − ΔNWC ± diğer operasyonel nakit düzeltmeleri

The formula is a practical bridge. The facility may place cash interest, rent, permitted capex and hedge cash on different lines. The calc must reconcile to the pack.

Variables in the formula

• CFADS: Cash flow available for debt service
• EBITDA: EBITDA
• Cash tax: Cash tax
• Maintenance capex: Mandatory maintenance capex
• ΔNWC: Additional cash tied in working capital

How to read it

EBITDA 300 and CFADS 170 means about 0.57 TL of each 1 TL of EBITDA became cash available for debt service. That conversion depends on sector, collections and asset age; there is no universal factor. CFADS below debt service is DSCR below 1.00x — arithmetic, not a policy threshold.

Numerical example

EBITDA 300 mn TL, cash tax 35 mn TL, mandatory maintenance 45 mn TL, working-capital increase 50 mn TL → CFADS = 300 − 35 − 45 − 50 = 170 mn TL.

Definitions are educational. They are not investment, credit or tax advice.