easy · Investment Banking valuation-core

Why is EBITDA often used as the denominator for Enterprise Value multiples, rather than Net Income?

1. EBITDA is nearly always a larger figure than Net Income.
2. EBITDA is a standardized GAAP line item on the income statement.
3. Net Income is reduced by non-cash charges such as depreciation expense.
4. EBITDA is independent of capital structure and tax jurisdictions.

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