[amp_mcq option1=”subtracting operating cost from net sales” option2=”subtracting net sales from operating costs” option3=”adding operating cost and net sales” option4=”adding interest and taxes” correct=”option1″]
The correct answer is A. Subtracting operating cost from net sales.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a measure of a company’s profitability. It is calculated by taking a company’s net income and adding back interest, taxes, depreciation, and amortization.
Net sales is the total amount of revenue that a company generates from its sales. Operating costs are the costs that a company incurs in order to generate its sales. These costs include things like cost of goods sold, selling, general, and administrative expenses.
EBITDA is a useful measure of a company’s profitability because it excludes non-cash expenses like depreciation and amortization. This makes it a good measure of a company’s ability to generate cash flow.
Option B is incorrect because it subtracts net sales from operating costs. This would give you a negative number, which is not possible.
Option C is incorrect because it adds operating costs and net sales. This would give you the company’s total revenue, which is not the same as EBITDA.
Option D is incorrect because it adds interest and taxes. These are non-cash expenses, so they should not be included in EBITDA.