Series 79 practice questionmediumComparable Company Analysis - Adjustments
When normalizing EBITDA for a comparable company universe, which of the following adjustments is most appropriate?
- AAdding back stock-based compensation
- BAdding back recurring operating expenses
- CSubtracting non-cash expenses
- DEliminating non-recurring items✓ Correct answer
Explanation
Why D — Eliminating non-recurring items
Adjusting for non-recurring items normalizes EBITDA for comparability. Adding back recurring expenses or all non-cash expenses distorts results; stock comp is sometimes adjusted, but non-recurring adjustments are most standard.
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