Series XVHardFundamental Analysis

The EV/EBITDA multiple is often preferred over P/E because it:

AIgnores the company's debt entirely
BUses only the market price of equity
CAlways gives a higher valuation
DIs capital-structure neutral and unaffected by depreciation and tax differences, aiding cross-company comparisoncheck_circle

Correct answer

D. Is capital-structure neutral and unaffected by depreciation and tax differences, aiding cross-company comparison

lightbulbDetailed Solution

EV/EBITDA compares total enterprise value (equity + net debt) with operating earnings before interest, tax, depreciation and amortisation. Because it captures debt and strips out financing, depreciation and tax policy differences, it enables cleaner comparison of firms with different capital structures than the equity-only P/E.

Reference: NISM Series XV Research Analyst, Chapter 3.

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