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Enterprise value multiple

Enterprise value multiple

Description

Enterprise value multiple (EV multiple) is used along with the enterprise value. It compares a theoretical company’s takeover price with company’s EBITDA value. In other words, the money that is going to be spent on acquiring the company is compared to the company’s earnings, calculated by the method of EBITDA. Data needed to calculate this ratio is collected from the balance sheet, income statement and stock market bulletin.

Norms and limitations

In general there are no norms for this ratio.

It is recommended to compare this ratio to those of the companies, working within the same industry.

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