What Is the Intent of Using EBITDA for Analyzing Foreign

question 37

Multiple Choice

What is the intent of using EBITDA for analyzing foreign financial statements?

• A)Adding back interest, taxes, depreciation, and amortization to net income takes out elements of earnings that are greatly affected by accounting diversity.
• B)It makes foreign GAAP conform to local GAAP.
• C)EBITDA brings foreign net income in line with net income under U.S.GAAP.
• D)All of the above

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Definitions:

Intrinsic Value

The actual, fundamental value of an asset, irrespective of its market value, determined through objective calculation or estimation.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.

Projects

Planned sets of interrelated tasks to be executed over a fixed period and within certain cost and other limitations.

Risk Premium

A risk premium is the additional return expected by an investor for taking on a higher level of risk, compared to a risk-free investment.