When using EBITDA instead of net income to measure a firm's operational characteristics, why are depreciation and amortization expense added back? O A. Depreciation and amortization expense are superficial. B. Depreciation and amortization expense represent expenses from an accounting standpoint but don't represent actual cash outflows. C. Depreciation and amortization expense are random numbers and can be ignored. D. Depreciation and amortization.

When using EBITDA instead of net income to measure a firm's operational characteristics, why are depreciation and amortization expense added back? O A. Depreciation and amortization expense are superficial. B. Depreciation and amortization expense represent expenses from an accounting standpoint but don't represent actual cash outflows. C. Depreciation and amortization expense are random numbers and can be ignored. D. Depreciation and amortization.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 12MCQ: Which of the following statements is true? a. The fixed asset turnover ratio assists managers in...

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Which of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.
When using EBITDA instead of net income to measure a firm’s operational characteristics, why are depreciation and amortization expense added back? Depreciation and amortization expense represent expenses from an accounting standpoint but don’t represent actual cash outflows. Depreciation and amortization expense represent an insignificant cash outflow for a business. Depreciation and amortization expense are superficial. Depreciation and amortization expense are random numbers and can be ignored.
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