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Investment bank Canaccord's Think Childcare (TNK) initiation of coverage states: "Childcare operators tend to generate...

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Finance

Investment bank Canaccord's Think Childcare (TNK) initiation of coverage states: "Childcare operators tend to generate EBIT margins of between 12%-20% at the operating level. We estimate that TNKs margins are currently around 15%-16% after corporate costs and expect that margins will gradually grow as scale efficiencies are reached. By comparison, given the far larger size, GEM (a competitor) operates on EBIT margins of ~22%."

Which of the following statements is NOT correct?

Select one:

a.

Corporate costs are likely to include head office costs such as executive, accounting, human resources and legal department salaries.

b.

Corporate costs are likely to grow slower than revenues as the firm expands organically and through bolt-on acquisitions.

c.

EBIT margin equals earnings before interest and tax divided by total assets.

d.

The higher the EBIT margin, the better.

e.

EBIT margins would be higher than profit margins but lower than EBITDA margins.

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