Which of the following is the major limitation of using EBITDA for analyzing foreign financial statements?
A)It is nearly impossible for most financial analysts to calculate this number.
B)Few analysts understand what this earnings number represents.
C)The excluded items with this approach may have implications for determining the value of firms under evaluation.
D)It cannot be converted from a foreign currency to a domestic currency.

Question

Quizplus · Accepted Answer

EBITDA excludes certain items such as depreciation, amortization, interest payment, and taxes. However, some of these excluded items may have significant implications for determining the value of firms under evaluation. Therefore, using EBITDA for analyzing foreign financial statements has limitations as analysts should also consider other financial metrics to get a better understanding of the company's financial condition.

Which of the Following Is the Major Limitation of Using