easy · Private Equity value-creation

An analyst at Alpha Capital is reviewing a Quality of Earnings (QoE) report for 'Global Services'. The report identifies a $2.5M one-time legal settlement paid by the company last year.

How should this affect the 'Adjusted EBITDA' calculation?

  1. It should be subtracted from the reported EBITDA.
  2. It should be ignored as it occurred in the prior fiscal year.
  3. It should be capitalized as an intangible asset on the balance sheet.
  4. It should be added back to the reported EBITDA.

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