Series 79 practice questionmediumFinancial Statement Analysis
Which adjustment is most appropriate when calculating adjusted EBITDA to assess a company's recurring profitability?
- AAdd back interest income
- BAdd back normal rent expense
- CExclude one-time restructuring charges✓ Correct answer
- DExclude recurring maintenance capex
Explanation
Why C — Exclude one-time restructuring charges
Adjusted EBITDA excludes one-time or non-recurring charges such as restructuring costs to better reflect the company's recurring profitability. Recurring expenses like maintenance capex are not added back because EBITDA focuses on earnings before interest, taxes, depreciation, and amortization, and capex is a cash outflow, not an expense.
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