medium · Corporate Credit Analysis fsa
A consumer goods firm reclassifies its 'Customer Acquisition Costs' (marketing spend) from an operating expense to a 'Capitalized Intangible' that is amortized over 5 years.
What is the impact on the firm's Debt/EBITDA ratio?
- The ratio improves because both Net Income and EBITDA increase
- The ratio worsens (increases) because debt increases
- The ratio is unaffected because it is a non-cash accounting change
- The ratio improves (decreases) because EBITDA increases
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