Firms A and B are in all points identical with the exception of their choice of depreciation method for their fixed assets.Firm A uses an accelerated depreciation method while firm B used a straight-line method.In the first year of their operations,which firm has the higher EBITDA
A) Firm A has the higher EBITDA.
B) Both firms have the same EBITDA.
C) Firm B has the higher EBITDA.

Question

Quizplus · Accepted Answer

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Since EBITDA excludes depreciation, the choice of depreciation method (accelerated vs. straight-line) does not affect EBITDA. Therefore, both firms will have the same EBITDA.

Firms a and B Are in All Points Identical with the Exception