EBITDA/EV Multiple

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DEFINITION of 'EBITDA/EV Multiple'

A financial ratio that measures a company's return on investment. The EBITDA/EV ratio may be preferred over other measures of return because it is normalized for differences between companies. Using EBITDA normalizes for differences in capital structure, taxation and fixed asset accounting. Meanwhile, using enterprise value also normalizes for differences in a company's capital structure.

INVESTOPEDIA EXPLAINS 'EBITDA/EV Multiple'

While computing this ratio is much more complicated, it is sometimes preferred because it provides a normalized ratio for comparing the operations of different companies. If a more conventional ratio (such as net income to equity) were used, comparisons would be skewed by each company's accounting policies. EBITDA/EV is commonly used to compare companies within an industry.

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RELATED FAQS
  1. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  2. How can I find a company's EV/EBITDA multiple?

    The EV/EBITDA multiple for a company can be found by comparing the enterprise value, or EV, to the earnings before interest, ... Read Full Answer >>
  3. When consolidating financials, how do you calculate Enterprise Value in cases that ...

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  4. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  5. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  6. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
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