In which of the following situations might the Price/EBITDA ratio be more useful than the P/E ratio?

Question

Quizplus · Accepted Answer

A) The Price/EBITDA ratio would be less useful when comparing companies from different countries due to the different accounting rules that may apply, as the EBITDA may not be standardized across countries. 
B) The Price/EBITDA ratio would be more useful than the P/E ratio when valuing small companies with little or no debt because earnings can be distorted by interest payments, which small companies with little or no debt may not have. 
C) The Price/EBITDA ratio would be more useful than the P/E ratio when valuing firms in an industry that is known to require a lot of upfront capital expenditures because depreciation and amortization related to these expenditures can impact net income and earnings per share, making the P/E ratio less informative. 
Therefore, both B and C describe scenarios in which the Price/EBITDA ratio may be more useful than the P/E ratio. The Price/EBITDA ratio may be more useful than the P/E ratio when valuing small companies with little or no debt and when valuing firms in an industry that requires a lot of upfront capital expenditures. This is because the P/E ratio is based on net income, which can be affected by factors such as debt and taxes, while the Price/EBITDA ratio is based on a company's cash flow and is therefore less affected by these factors. Additionally, when comparing companies from different countries, the P/E ratio can be affected by different accounting rules, making the Price/EBITDA ratio more useful.

In Which of the Following Situations Might the Price/EBITDA Ratio