For internal decision-making purposes, managers may use EBITDA as a substitute for the contribution margin.

Question

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EBITDA (earnings before interest, taxes, depreciation, and amortization) is a measure of a company's profitability that is often used as a substitute for the contribution margin for internal decision-making purposes. This is because EBITDA is a more comprehensive measure of profitability than the contribution margin, as it takes into account all of a company's operating expenses, including depreciation and amortization.

For Internal Decision-Making Purposes, Managers May Use EBITDA as a Substitute