medium · Corporate Credit Analysis
LakeFoods has a Debt/EBITDA of 3.5x and an FFO/Debt of 18%. FreshPack also has a Debt/EBITDA of 3.5x but an FFO/Debt of 28%.
Which of the following is the most likely reason for the discrepancy?
- FreshPack simply runs a more capital-intensive business model overall.
- LakeFoods pays higher interest rates or higher cash taxes than FreshPack.
- FreshPack is growing faster and absorbing more working capital currently.
- LakeFoods reports much higher annual depreciation expense than FreshPack does.
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