PREPARING FOR YOUR ONLINE TRAINING AT HOME

What is EV/EBITDA?

Enterprise Value/EBITDA is a common valuation multiple used to value a company and provide useful comparisons between similar companies. It’s an Enterprise Value multiple so you must ensure the numerator is before adding cash and deducting debt, and the denominator is before interest income and interest expense. Enterprise value (EV) is relevant to all stakeholders (both debt and stockholders) and the denominator must also reflect this. You must be consistent between the numerator and the denominator.

To better understand the relationship between the numerator and the denominator we can line up the Enterprise Value to equity value bridge with the income statement: