EBITDA Multiple Template
This EBITDA multiple template helps you find out the EBITDA multiple given the line items for determining the enterprise value.
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The EBITDA multiple is a financial ratio that compares a company’s Enterprise ValueEnterprise ValueEnterprise Value, or Firm Value, is the entire value of a firm equal to its equity value, plus net debt, plus any minority interest, used in valuation. It looks at the entire market value rather than just the equity value, so all ownership interests and asset claims from both debt and equity are included. to its annual EBITDAEBITDAEBITDA or Earnings Before Interest, Tax, Depreciation, Amortization is a company's profits before any of these net deductions are made. EBITDA focuses on the operating decisions of a business because it looks at the business’ profitability from core operations before the impact of capital structure. Formula, examples (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 EBITDA multiple provides a normalized ratio for differences in capital structure, taxation, fixed assets, and for comparing disparities of operations in various companies. The ratio takes a company’s enterprise value (which represents market capitalizationMarket CapitalizationMarket Capitalization (Market Cap) is the most recent market value of a company’s outstanding shares. Market Cap is equal to the current share price multiplied by the number of shares outstanding. The investing community often uses the market capitalization value to rank companies plus net debt) and compares it to the Earnings Net IncomeNet Income is a key line item, not only in the income statement, but in all three core financial statements. While it is arrived at through the income statement, the net profit is also used in both the balance sheet and the cash flow statement.Before InterestInterest ExpenseInterest expense arises out of a company that finances through debt or capital leases. Interest is found in the income statement, but can also be calculated through the debt schedule. The schedule should outline all the major pieces of debt a company has on its balance sheet, and calculate interest by multiplying the, TaxesTax ShieldA Tax Shield is an allowable deduction from taxable income that results in a reduction of taxes owed. The value of these shields depends on the effective tax rate for the corporation or individual. Common expenses that are deductible include depreciation, amortization, mortgage payments and interest expense, Depreciation, and AmortizationDepreciation ExpenseDepreciation expense is used to reduce the value of plant, property, and equipment to match its use, and wear and tear over time. Depreciation expense is used to better match the expense of a long-term asset to the revenue it generates. (EBITDA) for a given period.
The formula for calculating EBITDA multiple is: EBITDA Multiple = Enterprise Value / EBITDA
To Determine the Enterprise Value and EBITDA:
- Enterprise Value = (market capitalization + value of debt + minority interest + preferred shares) – (cash and cash equivalents)
- EBITDA = Earnings Before Tax + Interest + Depreciation + Amortization
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