Asked by Mitchell Allen on May 02, 2024
Verified
Analysts typically eliminate after-tax interest expense from EBI when calculating ROA.
After-tax Interest Expense
The interest expense on debt after accounting for the effects of income tax savings.
EBI
Earnings Before Interest, a profitability measure that calculates a company's earnings before any interest expenses are deducted.
- Acquire the skills to calculate and analyze Return on Assets (ROA), taking into account items that are not related to operating or recurring activities.
Verified Answer
SS
Schuyler SchweersMay 04, 2024
Final Answer :
True
Explanation :
After-tax interest expense is often excluded from EBI when calculating ROA to provide a more accurate picture of the profitability of a company's operations, rather than its financing decisions.
Learning Objectives
- Acquire the skills to calculate and analyze Return on Assets (ROA), taking into account items that are not related to operating or recurring activities.
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