Valuation and investment
Enterprise value (EV) and EV/EBITDA
The value of the whole business, to lenders and owners together.
Facts checked against sources onWhat does Enterprise value (EV) and EV/EBITDA mean?
Enterprise value is the value of a company's whole business: the value of its equity plus its debt, minus its cash (with smaller adjustments in practice). The EV/EBITDA multiple divides enterprise value by EBITDA. If similar companies trade at 8 times EBITDA and the target has EBITDA of 10 million, a first estimate of its enterprise value is 80 million.
Where does it come up in case interview prep?
- EBITDA versus operating profit versus free cash flowLesson in Reading a business through its numbers: the three statements, cash and value
- Valuation in practice: multiples, a simple DCF, NPV, IRR and paybackLesson in Reading a business through its numbers: the three statements, cash and value
- Using this in a case: what to ask, what to calculate, what to sayLesson in Reading a business through its numbers: the three statements, cash and value
- Mergers, acquisitions, and due diligenceLesson
- Private equity and venture capital: investor style casesLesson in The same acumen in other roles
- How private equity and venture capital funds workLesson in Private equity and venture capital
- LBO returns and fund economicsLesson in Private equity and venture capital
- Games and betting players, trends 2024 to 2026, and how to crack the casesLesson in Video games and betting: publishers, platforms, sportsbooks and lotteries
Related terms
- EBITDAEarnings before interest, taxes, depreciation and amortization.
- Valuation multipleValue as a multiple of a financial measure, based on similar companies.
- DCF (discounted cash flow)Valuing a business from the future cash it will generate.
- Return on investment (ROI)The gain from an investment relative to its cost.
- Payback periodHow long until an investment earns back its cost.
- Time value of moneyMoney today is worth more than the same money later.
- Discount rate and hurdle rateThe rate used to turn future cash into today's value.
- Cost of capital (WACC)The return a company must earn to satisfy its lenders and owners.
Learn it in context
See Enterprise value (EV) and EV/EBITDA at work in a lesson from Reading a business through its numbers: the three statements, cash and value, with checks as you go.
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