Which of the following is considered by analysts when comparing the operations of two firms that are financed differently?
A)Total assets
B)Earnings before interest and taxes
C)Net sales
D)Gross profit
E)Retained earnings

Question

Quizplus · Accepted Answer

When comparing the operations of two firms that are financed differently, analysts consider earnings before interest and taxes (EBIT) as it helps to take out any differences in financing structure and provide a clear picture of the operating performance. A and C are not as relevant as total assets and net sales can vary depending on the nature of the business and industries. D and E are not as relevant as gross profit and retained earnings, respectively, are affected by various factors including cost of goods sold, taxes, and dividends.

Which of the Following Is Considered by Analysts When Comparing