Can anyone concludes the capital structure effects on P/E & EV/EBITDA(EV/EBIT) in 2 sentences?
Hi, guys
I know that everybody knows P/E is capital structure dependent and EV/EBITDA & EV/EBIT are capital structure neutral. However, there are numbers of different reasons here for this argument.
If I said: P/E is capital structure dependent, b/c holds everything equal, when you get more debts, it would decrease the earning(because of interests payments), thus make the P/E higher. EV/EBITDA&EV/EBIT are capital structure neutral, because there is no effects of the interests payments.
Is this the appropriate answer?
If not, what would be the answer in few sentences?
THX