easy · Investment Banking valuation-core
What is the primary reason why Enterprise Value (EV) is used as the numerator for EBITDA multiples instead of Equity Value?
- Equity Value cannot be meaningfully or reliably calculated for companies with very high debt levels
- EBITDA is available to all capital providers, so the numerator must reflect the total value of the firm
- EBITDA excludes depreciation expense, a non-cash item that some argue is only relevant to equity holders
- Enterprise Value is inherently more stable and directly comparable than Equity Value across differing industries
Sign up free to see the explanation and track your rank →
More Investment Banking valuation-core practice
- What is the Multiple on Invested Capital (MOIC)?
- What is the control premium?
- Which valuation methodology would likely produce the 'floor' valuation for a mature indust
- Which of the following changes, held in isolation, would most likely achieve this?
- What is the Multiple on Invested Capital (MOIC)?
- If a company has an Unlevered Free Cash Flow (UFCF) of $500 million in Year 5, a WACC of 1
- What is the 3-year Compound Annual Growth Rate (CAGR)?
- What is the Multiple on Invested Capital (MOIC)?