hard · Investment Banking valuation-core
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.
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