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

Question

Quizplus · Accepted Answer

The intent of using EBITDA for analyzing foreign financial statements is to add back interest, taxes, depreciation, and amortization to net income, which takes out elements of earnings that are greatly affected by accounting diversity. This makes it easier to compare and analyze foreign financial statements. Option B is not correct, as it does not make foreign GAAP conform to local GAAP. Option C is not correct, since the use of EBITDA does not bring foreign net income in line with net income under U.S. GAAP - it simply adjusts it to exclude certain elements. Therefore, the best choice is option A.

What Is the Intent of Using EBITDA for Analyzing Foreign