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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