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This EV/EBITDA template guides you through the calculation of EV/EBITDA using figures from an Income Statement.
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EV/EBITDA is a ratio that looks at a company’s Enterprise Value (EV) and compares it to its Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA). This ratio is one of the most common metrics for valuation when comparing the relative value of different businesses.
The ratio of EV/EBITDA is used to compare the entire value of a business with the amount of EBITDA it earns on an annual basis. This ratio tells investors how many times EBITDA they have to pay, were they to acquire the entire business.
The most common uses of EV/EBITDA are:
To determine what multiple a company is currently trading at
To compare the valuation of multiple companies
To calculate the terminal value in a Discounted Cash Flow DCF model
In negotiations for the acquisition of a private business
In calculating a target price for a company in an equity research report
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Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
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CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
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