Series 79 practice questioneasySector Performance Metrics
Which of the following is MOST appropriate when comparing companies in the same sector but with different capital structures?
- ADividend payout ratio
- BP/E ratio
- CPrice/book ratio
- DEV/EBITDA✓ Correct answer
Explanation
Why D — EV/EBITDA
EV/EBITDA normalizes for differences in capital structure by using enterprise value and earnings before interest, taxes, depreciation, and amortization. P/E, price/book, and dividend payout can be distorted by leverage differences.
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