n NISM Certifications
XV NISM Series XV
Medium

For which type of industries is EV/EBITDA more suitable than EV/EBIT?

Practice question from NISM XV Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Start-Ups

  2. B

    Matured

  3. C

    Labour intensive

  4. Capital intensive

    Correct answer

Why this is the answer

Capital-intensive industries face large differences in asset costs and depreciation methods. EV/EBITDA avoids the distortions caused by depreciation, making it more reliable than EV/EBIT for valuation.

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