easy · Corporate Credit Analysis

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

1. It results in a higher ratio that makes the company look stronger to lenders.
2. It is required by GAAP accounting for all public filers.
3. It accounts for the heavy reinvestment required to keep the manufacturing facilities operational.
4. It ignores the impact of depreciation on the income statement.

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