Series 79 practice questioneasyFinancial Statement Analysis
Lakeside Software reports revenue of $270 million, cost of goods sold of $140 million, SG&A expense of $18 million, and depreciation of $10 million. What is EBITDA?
- A$102 million
- B$122 million
- C$112 million✓ Correct answer
- D$102 million
Explanation
Why C — $112 million
$112 million EBITDA is calculated before depreciation and amortization, so the analyst subtracts COGS and SG&A from revenue but does not subtract depreciation. Investment bankers rely on EBITDA to compare operating performance across companies with different capital structures and depreciation policies.
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