Which of the following is NOT an advantage of the EV/EBITDA valuation approach over the price-earnings approach?
A) Because the EV/EBITDA approach is more of a cash flow-oriented method, there is less room for accounting discretion.
B) Because EBITDA is measured before interest and depreciation expenses are deducted, this method MAXIMIZES potential distortions from capital structure differences
C) Because EBITDA is measured before interest and depreciation expenses are deducted, this method minimizes potential distortions from from fixed asset differences across firms when performing comparable analysis.
D) All of the above are advantages, not disadvantages for the EV/EBITDA approach.
B
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