easy · Investment Banking
Which of the following is the most accurate reason why EBITDA is used as the primary metric for Enterprise Value multiples instead of Net Income?
- It captures the impact of ongoing capital expenditures, which many analysts still view as the primary driver of long-term value
- It is a GAAP-audited figure, so management has essentially zero latitude to adjust or manipulate the reported value
- It is independent of a company's capital structure and tax jurisdiction, allowing for better comparability between peers
- It represents the total pool of cash a company could theoretically pay out as dividends to its common shareholders in a given year
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