hard · Investment Banking
An analyst is comparing two companies. Company A expenses all of its software development costs. Company B capitalizes them.
How will Company B's valuation multiples and financial ratios likely differ from Company A's, assuming identical business operations?
- Company B will have higher Net Income but lower Cash Flow from Operations.
- There will be no difference in EBITDA because D&A will offset the capitalization.
- Company B will have lower EBITDA and higher EV/EBITDA multiples.
- Company B will have higher EBITDA and lower EV/EBITDA multiples.
Sign up free to see the explanation and track your rank →
More Investment Banking practice
- What is the Multiple on Invested Capital (MOIC)?
- What is the control premium?
- Which valuation methodology would likely produce the 'floor' valuation for a mature indust
- Which of the following changes, held in isolation, would most likely achieve this?
- What is the Multiple on Invested Capital (MOIC)?
- If a company has an Unlevered Free Cash Flow (UFCF) of $500 million in Year 5, a WACC of 1
- What is the 3-year Compound Annual Growth Rate (CAGR)?
- If a company's Net Debt is negative, what is the relationship between its Equity Value and