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Question:
What are the four most common valuation multiples?
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Answer:
EV / EBITDA:
Funds attributable to all investors
Higher up on the income statement
Does not include impact of capital expenditures so could make sense to use for a company where D&A is only a small % of revenue
EV / EBIT:
Higher Fixed costs
Makes sense to use where capex is a larger % of revenue and thus impacts the profitability of the company
Price / Earnings:
Earnings are the bottom line so takes into account D&A, interest, and tax expense
Just the funds attributable to shareholders. Government and debt holders have already been paid
EV / Sales:
If the company has negative EBITDA, not profitable yet, can be useful. Younger internet companies might be an example where it could make sense to use
Other
Enterprise & Equity Values
Enterprise & Equity Values
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Enterprise & Equity Values
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Enterprise & Equity Values
What is the difference between Enterprise Value and Equity Value?
Enterprise & Equity Values
Why can't you use Equity Value / EBITDA as a multiple?
Enterprise & Equity Values
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Enterprise & Equity Values
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Enterprise & Equity Values
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Enterprise & Equity Values
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Enterprise & Equity Values
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Enterprise & Equity Values
Why do you subtract cash in the Enterprise Value formula?
Enterprise & Equity Values
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Enterprise & Equity Values
Why do you need to add Minority Interest to Enterprise Value?
Enterprise & Equity Values
What is the formula for Enterprise Value?