The enterprise to EBITDA method of valuation can be compared more readily among firms exhibiting different levels of leverage than for other measures of earnings, since the numerator represents the total value of the firm and the denominator measures earnings before interest.

Question

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This statement is true because the enterprise value to EBITDA ratio calculates the total value of the firm, including both equity and debt, and compares it to EBITDA, which is earnings before interest, taxes, depreciation, and amortization. Since the denominator does not include interest, the ratio is not affected by differences in the firms' leverage levels, making it easier to compare firms with varying levels of debt.

The Enterprise to EBITDA Method of Valuation Can Be Compared