Valuation and investment
Enterprise value (EV) and EV/EBITDA
The value of the whole business, to lenders and owners together.
Last reviewedWhat 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?
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.