Series 79 practice questioneasyValuation Methods
Which valuation method is least affected by temporary differences in capital structure among peer companies?
- AEnterprise value to EBITDA✓ Correct answer
- BPrice to earnings
- CDividend yield
- DPrice to book
Explanation
Why A — Enterprise value to EBITDA
Enterprise value to EBITDA EV/EBITDA compares total firm value with a pre-interest earnings measure, which reduces distortion from leverage differences. Equity value multiples such as P/E are much more sensitive to debt levels and tax profiles.
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