easy · Corporate Credit Analysis credit-metrics

For a capital-intensive industry like steel or cement, why is the (EBITDA - Capex) / Interest ratio often more meaningful than EBITDA / Interest?

1. It produces a higher, more flattering ratio that can make the company appear stronger to prospective lenders.
2. It is a mandatory GAAP disclosure line item required of all public filers each year.
3. It accounts for the heavy reinvestment required to keep the manufacturing facilities operational.
4. It simply ignores the non-cash impact of depreciation and amortization on the company's reported income statement.

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