medium · Corporate Credit Analysis
An analyst is comparing two companies: one with heavy 'Goodwill Amortization' (under old rules) and one with only 'Equipment Depreciation'.
Why is EBITDA a better point of comparison than EBIT?
- EBITDA is more conservative because it ignores the value of brands
- Because Goodwill Amortization is a cash expense under certain jurisdictions
- EBITDA adds back all non-cash charges, neutralizing the effect of different intangible asset histories
- Because EBIT is after interest, making it non-comparable between firms with different debt levels
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?