Series 79 practice questionhardFinancial Statement Analysis
A company’s adjusted EBITDA excludes $3 million in restructuring charges. Why might an analyst remove this item for normalized earnings calculations?
- ATo increase depreciation expense
- BTo reduce cash taxes paid
- CPresent operating performance excluding one-time, non-recurring expenses✓ Correct answer
- DTo show higher interest expense
Explanation
Why C — Present operating performance excluding one-time, non-recurring expenses
Removing one-time restructuring charges gives a better view of normalized, recurring earnings. Including such items may distort performance comparisons and valuation multiples.
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