Series 79 practice questionmediumFinancial Statement Adjustments
An investment banker is normalizing a target company’s earnings for unusual items. Which of the following would typically be ADDED BACK to EBITDA?
- ARecurring payroll expenses
- BLegal settlement expense from a one-time lawsuit✓ Correct answer
- CRegular depreciation expense
- DInventory write-down due to business seasonality
Explanation
Why B — Legal settlement expense from a one-time lawsuit
A one-time legal settlement is a non-recurring item and is typically added back to EBITDA for normalized analysis. Recurring payroll and regular depreciation are ongoing expenses, and a seasonal inventory write-down is not necessarily non-recurring.
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