Tax Shield
What is a Tax Shield? A Tax Shield is an allowable deduction from taxable income that results in a reduction of taxes owed. Tax shields differ between countries and are based on what deductions are eligible versus ineligible. The value of these shields depends on the effective tax rate for the corporation or individual (being subject…
Private Company Valuation
What is Private Company Valuation? Private company valuation is a set of valuation methodologies used to determine the intrinsic value of a private company. For public companies, we can easily observe the stock price and source the number of shares outstanding from filings. The market value of the public company, also called market capitalization, is the product of…
EBITDA Multiple
What is the EBITDA Multiple? The EBITDA multiple is a financial ratio that compares a company’s Enterprise Value to its annual EBITDA (which can be either a historical figure or a forecast/estimate). This multiple is used to determine the value of a company and compare it to the value of other, similar businesses. A company’s…
Beta
Enterprise Value vs Equity Value
Overview of Enterprise Value vs. Equity Value In this guide, we outline the difference between the enterprise value of a business and the equity value of a business. Simply put, the enterprise value is the entire value of the business, without giving consideration to its capital structure, and equity value is the total value of…
Cap Table
What is a Cap Table? A cap table (also called capitalization table) is a spreadsheet for a startup company or early-stage venture that lists all the company’s securities, such as common shares, preferred shares, warrants, who owns them, and the prices paid by the investors for these securities. It indicates each investor’s percentage of ownership…
Market to Book Ratio
What is the Market to Book Ratio (Price to Book)? The Market to Book Ratio (also called the Price to Book Ratio), is a financial valuation metric used to evaluate a company’s current market value relative to its book value. The market value is the current stock price of all outstanding shares (i.e. the price…
Unlevered Beta / Asset Beta
What is Unlevered Beta (Asset Beta)? Unlevered beta (a.k.a. Asset Beta) is the beta of a company without the impact of debt. It measures the systematic risk of a company’s assets relative to the market, independent of the company’s financial leverage. It compares the risk of an unlevered company to the risk of the market. It…
Valuation Methods
What are the Main Valuation Methods? When valuing a company as a going concern, there are three main valuation methods used by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions. These are the most common methods of valuation used in investment banking, equity research, private equity, corporate development, mergers &…
