Seller's Discretionary Earnings Calculator

✖Pre-Tax Income is the bottom-line profit of the business after deducting all operating expenses, taxes, and interest.ⓘ Pre-Tax Income [PTI]			+10% -10%
✖Owner's Salary is the compensation paid to the owners for their role in the business.ⓘ Owner's Salary [OS]			+10% -10%
✖Net Interest Expenses represents the interest paid on loans or other forms of debt.ⓘ Net Interest Expenses [NIE]			+10% -10%
✖Depreciation and Amortization are accounting methods used to allocate the cost of tangible and intangible assets over their useful lives.ⓘ Depreciation and Amortization [D&A]			+10% -10%
✖Discretionary Expenses refer to non-essential expenses that are not directly tied to the day-to-day operations of a business.ⓘ Discretionary Expenses [DE]			+10% -10%
✖Non Recurring Expenses are one-time or irregular expenses that are not expected to occur in the future or are not directly related to the core operations of the business.ⓘ Non Recurring Expenses [NRE]			+10% -10%

✖Seller Discretionary Earnings measures the normalized, operating profitability of small to mid-sized businesses.ⓘ Seller's Discretionary Earnings [SDE]

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Formula

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Seller's Discretionary Earnings

Formula

`"SDE" = "PTI"+"OS"+"NIE"+"D&A"+"DE"+"NRE"`

Example

`"402760"="235000"+"78000"+"4560"+"26500"+"36700"+"22000"`

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Seller's Discretionary Earnings Solution

STEP 0: Pre-Calculation Summary

Formula Used

Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses
SDE = PTI+OS+NIE+D&A+DE+NRE
This formula uses 7 Variables

Variables Used

Seller Discretionary Earnings - Seller Discretionary Earnings measures the normalized, operating profitability of small to mid-sized businesses.
Pre-Tax Income - Pre-Tax Income is the bottom-line profit of the business after deducting all operating expenses, taxes, and interest.
Owner's Salary - Owner's Salary is the compensation paid to the owners for their role in the business.
Net Interest Expenses - Net Interest Expenses represents the interest paid on loans or other forms of debt.
Depreciation and Amortization - Depreciation and Amortization are accounting methods used to allocate the cost of tangible and intangible assets over their useful lives.
Discretionary Expenses - Discretionary Expenses refer to non-essential expenses that are not directly tied to the day-to-day operations of a business.
Non Recurring Expenses - Non Recurring Expenses are one-time or irregular expenses that are not expected to occur in the future or are not directly related to the core operations of the business.

STEP 1: Convert Input(s) to Base Unit

Pre-Tax Income: 235000 --> No Conversion Required
Owner's Salary: 78000 --> No Conversion Required
Net Interest Expenses: 4560 --> No Conversion Required
Depreciation and Amortization: 26500 --> No Conversion Required
Discretionary Expenses: 36700 --> No Conversion Required
Non Recurring Expenses: 22000 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

SDE = PTI+OS+NIE+D&A+DE+NRE --> 235000+78000+4560+26500+36700+22000

Evaluating ... ...

SDE = 402760

STEP 3: Convert Result to Output's Unit

402760 --> No Conversion Required

FINAL ANSWER

402760 <-- Seller Discretionary Earnings

(Calculation completed in 00.004 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

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Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

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< 17 Asset Management Calculators

Seller's Discretionary Earnings

Go Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses

Amortization of Intangible Assets

Go Amortization Expense = (Historical Cost of Intangible Asset-Residual Value)/Useful Life Assumption

Cash Available for Distribution

Go Cash Available for Distribution = Funds from Operations+Non-Recurring Items-Capital Expenditures

Residual Income

Go Residual Income = Operating Income-Minimum Required Rate of Return*Average Operating Assets

Net Capital Spending

Go Net Capital Spending = Ending Net Fixed Assets-Beginning Net Fixed Assets+Depreciation

Capital Structure

Go Capital Structure = Common Equity Weight+Debt Weight+Preferred Stock Weight

Allowance Method of Doubtful Accounts

Go Net Accounts Receivables = Gross Accounts Receivables-Allowance for Doubtful Accounts

Operating Working Capital

Go Operating Working Capital = Operating Current Assets-Operating Current Liabilities

Inventory Write-Down

Go Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value

Net Realizable Value

Go Lower of Cost or Net Realizable Value = Expected Sale Price-Disposal Costs

Net Identifiable Assets

Go Net Identifiable Assets = Identifiable Assets-Total Liabilities

Expense Ratio

Go Expense Ratio = Annual Operating Expenses/Average Fund Assets

Inventory Days

Go Inventory Days = (Average Inventory/Cost Of Goods Sold)*365

Basic Earnings Power Ratio

Go Basic Earnings Power Ratio = Operating Income/Total Assets

Internal Growth Rate

Go Internal Growth Rate = Retention Ratio*Return on Assets

Depreciable Cost of Asset

Go Depreciable Cost = Purchase Cost-Salvage Value

Conversion Price

Go Conversion Price = Par Value/Conversion Ratio

Seller's Discretionary Earnings Formula

Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses
SDE = PTI+OS+NIE+D&A+DE+NRE

What is Seller's Discretionary Earnings?

Seller's Discretionary Earnings provides a clearer picture of the business's profitability and the cash flow available to the owner, which is particularly useful in valuing small and medium-sized businesses.
Seller Discretionary Earnings (SDE) is particularly important in the valuation of small businesses because it provides a more comprehensive view of the business's financial performance and the cash flow available to the owner. Potential buyers often use SDE as a starting point to determine a business's value, as it reflects the earnings that a new owner could expect to generate from the business.

It's essential to calculate and present SDE accurately and transparently when selling a business to attract potential buyers and negotiate a fair price. Additionally, professional business appraisers or brokers might use more detailed methods to calculate SDE, taking into account various adjustments and normalization of financial statements to provide a more accurate representation of the business's earnings.

How to Calculate Seller's Discretionary Earnings?

Seller's Discretionary Earnings calculator uses Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses to calculate the Seller Discretionary Earnings, The Seller's Discretionary Earnings is a financial metric used to evaluate the earnings of a business by adding back non-operational or discretionary expenses to the net income. Seller Discretionary Earnings is denoted by SDE symbol.

How to calculate Seller's Discretionary Earnings using this online calculator? To use this online calculator for Seller's Discretionary Earnings, enter Pre-Tax Income (PTI), Owner's Salary (OS), Net Interest Expenses (NIE), Depreciation and Amortization (D&A), Discretionary Expenses (DE) & Non Recurring Expenses (NRE) and hit the calculate button. Here is how the Seller's Discretionary Earnings calculation can be explained with given input values -> 402760 = 235000+78000+4560+26500+36700+22000.

FAQ

What is Seller's Discretionary Earnings?

The Seller's Discretionary Earnings is a financial metric used to evaluate the earnings of a business by adding back non-operational or discretionary expenses to the net income and is represented as SDE = PTI+OS+NIE+D&A+DE+NRE or Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses. Pre-Tax Income is the bottom-line profit of the business after deducting all operating expenses, taxes, and interest, Owner's Salary is the compensation paid to the owners for their role in the business, Net Interest Expenses represents the interest paid on loans or other forms of debt, Depreciation and Amortization are accounting methods used to allocate the cost of tangible and intangible assets over their useful lives, Discretionary Expenses refer to non-essential expenses that are not directly tied to the day-to-day operations of a business & Non Recurring Expenses are one-time or irregular expenses that are not expected to occur in the future or are not directly related to the core operations of the business.

How to calculate Seller's Discretionary Earnings?

The Seller's Discretionary Earnings is a financial metric used to evaluate the earnings of a business by adding back non-operational or discretionary expenses to the net income is calculated using Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses. To calculate Seller's Discretionary Earnings, you need Pre-Tax Income (PTI), Owner's Salary (OS), Net Interest Expenses (NIE), Depreciation and Amortization (D&A), Discretionary Expenses (DE) & Non Recurring Expenses (NRE). With our tool, you need to enter the respective value for Pre-Tax Income, Owner's Salary, Net Interest Expenses, Depreciation and Amortization, Discretionary Expenses & Non Recurring Expenses and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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