Below is the financial information on two companies, company A and company B. Study
the financial information.
1) Just based on your analysis of the two companies, which company do you think would
be the best company to buy, if you were considering buying a company?
Co A Co B
Equipment 400,000 75,000
Bank Loan 500,000 100,000
|
Sales 1,000,000 1,000,000
COGS 600,000 600,000
Gross Profit 400,000 400,000
SG & A 200,000 200,000
Depreciation 10 40,000 7,500
Earnings Before Int & Tax 160,000 192,500
Interest 10% 50,000 10,000
Earnings Before Tax 110,000 182,500
Tax 21% 23,100 38,325
Net Income 86,900 144,175
In analysing a business we often look at the company's EBITDA, which stand for
Earnings Before Interest, Taxes, Depreciation, and Amortization.
2) Calculate the EBITDA for each company.
3) Based on your calculation of EBITDA did you change your mind about which company
to buy? Now which company would be better?
Submit your calculations and answers in an Excel spreadsheet.