easy · Investment Banking
Why is EBITDA often used as the denominator for Enterprise Value multiples, rather than Net Income?
- EBITDA is nearly always a larger figure than Net Income.
- EBITDA is a standardized GAAP line item on the income statement.
- Net Income is reduced by non-cash charges such as depreciation expense.
- EBITDA is independent of capital structure and tax jurisdictions.
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