Which of the following financial ratios is beneficial for comparing companies in different industries?

The EV/EBITDA ratio is particularly beneficial for comparing companies across different industries because it normalizes for differences in capital structure, taxation, and depreciation methods. This ratio represents the value of a company as a multiple of its earnings before interest, taxes, depreciation, and amortization, which allows analysts and investors to assess the operating performance of companies in a way that is independent of their financing and accounting choices.

In contrast, the P/E ratio can be heavily influenced by the varying levels of earnings growth and risk profiles present in different industries. The dividend yield can also vary significantly depending on company policies and industry practices, making it less reliable for cross-industry comparisons. Similarly, net profit margin is impacted by industry-specific cost structures, tax rates, and competitive environments, which can distort comparisons between companies operating in distinct sectors. Therefore, the EV/EBITDA ratio stands out as a more robust metric for evaluating companies in different industries on a relative basis.