Question

Jake Entertainment Corporation has three segments with revenue, operating income, and depreciation and amortization information (in millions) as follows: Segment Revenue Operating Income Depreciation and Amortization Film $5,000 $1,500 $525 Theme Park 1,000 320 112 Video Game 500 175 53 Totals $6,500 $1,995 $690 The segment with the highest EBITDA as a percent of revenue is a. Video Game b. The Theme Park and Video Game segments have equal EBITDA as a percent of revenue. c. Theme Park d. Film

Answer 1

Answer:

• The correct answer is Option A ( Video game ).

Explanation:

The EBITDA is a measure of earnings that calculate before depreciation and amortization,interests and taxes.So,here EBITDA is operating income of segment.

Calculation the segment with the highest EBITDA as a percent of revenue :

Segment	EBITDA(Operating income of segment)	Revenue	EBITDA as a percent of revenue each segment
Film	$ 1,500	$ 5,000	= $ 1,500 / $ 5,000 = 0.3*100 [ convert to percent ] = 30%
Theme park	$ 320	$ 1,000	= $ 320 / $ 1,000 *100 = 0.32*100 [ convert to percent ] = 32%
Video game	$ 175	$ 5,00	= $ 175 / $ 500 *100 = 0.35*100 [ convert to percent ] = 35%

Therefore , the segment with the highest EBITDA as a percent of revenue is Video game with 35%