What is Financial Modeling In Private Equity?
In private equity, financial modeling typically consists of building leveraged buyout (LBO)Leveraged Buyout (LBO)A leveraged buyout (LBO) is a transaction where a business is acquired using debt as the main source of consideration. models to evaluate the return profile of acquiring a business. The main metrics that are used in a private equity financial model include the internal rate of return (IRR)Internal Rate of Return (IRR)The Internal Rate of Return (IRR) is the discount rate that makes the NPV of a project zero. Learn how to use the IRR formula., cash on cash return, net present value (NPV), debt/EBITDA ratioDebt/EBITDA RatioThe net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio measures financial leverage and a company’s ability to pay off its debt. Essentially, the net debt to EBITDA ratio (debt/EBITDA) gives an indication as to how long a company would need to operate at its current level to pay off all its debt., debt/equity ratio, and other rates or return or leverage.
![Financial Modeling In Private Equity]()