In a situation with flat EBITDA, what is a viable strategy to increase returns?

Improving interest expense management is a viable strategy to increase returns in a situation with flat EBITDA. When EBITDA remains constant, any increase in costs, including interest expenses, directly impacts the bottom line and reduces profitability. By effectively managing interest expenses—through refinancing debt to lower interest rates, restructuring existing debt, or negotiating better terms—companies can reduce their overall financial burden and keep a larger portion of their earnings. This increase in net income can lead to improved returns for equity holders, even in a flat EBITDA scenario.

Additionally, managing interest expenses can enhance cash flow, which is crucial for leveraged firms that have significant debt obligations. When cash flow is optimized, it allows the company to allocate more resources toward strategic investments or to return capital to shareholders, ultimately leading to higher returns.

In contrast, increasing capital expenditure may lead to more long-term investments but could strain liquidity and not immediately address the flat EBITDA issue. Raising the purchase price could work against a company’s competitive positioning and might not lead to increased returns. Increasing working capital requirements usually ties up cash in operational assets, which can detract from returns, especially if EBITDA isn't increasing to support these additional investments. Thus, effective interest expense management stands out as a strategic approach to enhancing financial performance without relying on increases