What does adjusted net income mean?
Adjusted net income is the projected amount of money earned by the new owner of the business and what the new owner can expect to put in his pocket before debt service (P&I) has been deducted. It usually includes; owner’s salary and fringe benefits like personal autos, insurance, credit cards, interest, depreciation, and any other expenses paid by the business that are not entirely business related or they may be a one-time expense that will not be incurred by the new owner. Cash flow or SDC, Seller’s discretionary cash are similar terms. It is very important that the Buyer’s CPA review the Seller’s financial records during the due diligence period to determine if the adjusted net income numbers are valid.
