Series 79 practice questionmediumFinancial Statement Analysis
A company has revenue of $120 million, cost of goods sold of $72 million, SG&A expenses of $18 million, and depreciation of $6 million. What is the company's EBITDA?
- A$24 million
- B$42 million
- C$48 million
- D$30 million✓ Correct answer
Explanation
Why D — $30 million
EBITDA = Revenue - COGS - SG&A = $120M - $72M - $18M = $30M. Note that depreciation of $6M is not subtracted because EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is a widely used proxy for operating cash flow in investment banking and is the basis for many valuation multiples.
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