easy · Investment Banking implied-share-price

In the context of the EV/EBITDA multiple, how does adding Noncontrolling Interest (NCI) to the numerator achieve the 'Matching Principle'?

  1. It allows the analyst to compare the company's effective tax rate against non-consolidated industry peers.
  2. EBITDA includes 100% of the subsidiary's earnings, so the numerator must reflect 100% of the subsidiary's value.
  3. NCI represents a recurring cash inflow that gets added to the enterprise's cash balance to determine net acquisition cost.
  4. It ensures the multiple is anchored to the book value of equity rather than its market trading value.

Sign up free to see the explanation and track your rank →

More Investment Banking implied-share-price practice

KomFi: Test Prep Made Easy

KomFi: Test Prep Made Easy — free adaptive practice for GMAT, GRE, SAT, ACT, National Real Estate Exam, Investment Banking, and finance with full explanations.

KomFi Academy is free GMAT prep and personalized GMAT help built as a training platform: 92,240+ practice questions, 30,500+ flashcards, on-demand video lectures, podcasts, and 4K slide decks. Flagship tracks: Free GMAT Prep, Free GMAT Resources, National Real Estate Exam Prep, Investment Banking Prep, Finance Prep, GRE, SAT, ACT, LSAT, MCAT, Financial Accounting, Private Equity, Private Credit, and Quantitative Finance.

Free GMAT Prep & Personalized GMAT Help

What's inside

Topics

View pricing · Read testimonials