medium · Corporate Credit Analysis
A software company capitalizes $40 million of internal development costs rather than expensing them.
For a credit analyst, how does this accounting choice affect reported EBITDA and the quality of earnings assessment?
- EBITDA is inflated, and free cash flow conversion is artificially weakened
- EBITDA is inflated, but Net Net Worth is significantly increased
- EBITDA is unaffected, but Net Income is higher
- EBITDA is lower, but the balance sheet is strengthened
Sign up free to see the explanation and track your rank →
More Corporate Credit Analysis practice
- Apex Manufacturing has a total exposure at default (EAD) of… — What is the annual expected
- What is the company's Funds From Operations (FFO)?
- Which statement best reflects the credit risk synthesis?
- A credit agreement requires a borrower to maintain a Net Lev… — What type of covenant is t
- Using the Merton structural model intuition, if a company's equity volatility (sigma_V) in
- What is its CET1 ratio?
- If EBITDA is $150M, what is the entry leverage multiple?
- What is its EBITDA/Interest coverage ratio?