Ask Joey ™ a Question

How to calculate an EBITDA multiple?

An EBITDA multiple is calculated by taking enterprise value and dividing by EBITDA. This ratio allows investors to compare an EBITDA multiple for a potential acquisition to the EBITDA multiple for recent transactions that were executed.

The visual below shows how investors can compare EBITDA multiples of three difference companies that vary in enterprise value and EBITDA.


You might also be interested in...

  • What do accountants mean when they say revenue can be recognized under the accrual basis of accounting?

    Under U.S. GAAP, which requires the use of accrual basis accounting, a company cannot recognize revenue until their performance obligation is satisfied. The visual below illustrates that key steps to revenue recognition:

  • What is the relationship between volume and variable cost per unit?

    If the variable cost per unit remains fixed, then any increase or decrease in unit volume will result in an increase or decrease in total variable costs for a business. For example, if variable cost per unit was steady at $5, then if unit volume were to increase from 100 to 200 units, then total […]

  • How can variable sampling risk impact the efficiency or effectiveness of an audit?

    Audit risk is comprised of inherent risk, control risk, and detection risk. The level of substantive testing that the audit performs is based on detection risk, which is set after the audit team assesses inherent risk and control risk. Variable Sampling – Substantive Testing When the audit team is performing substantive testing, they will use […]