Substituting EBITDA for EBIT When Computing the Times Interest Earned

question 43

Multiple Choice

Substituting EBITDA for EBIT when computing the times interest earned ratio will make the company appear

• A) more leveraged.
• B) less leveraged.
• C) more profitable.
• D) less efficient.

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Definitions:

Rate of Return

Earnings or losses seen on an investment during a fixed interval, presented as a percentage of the investment's first cost.

Compounded Monthly

Indicates that interest is calculated and added to the principal balance of an investment or loan on a monthly basis, leading to exponential growth over time.

Future Value

The value of an asset or amount of money at a specific date in the future that is equivalent in value to a specified sum today.

Rate of Interest

Another term for interest rate, it specifies the amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.