1. What is the EBITDA Multiplier?

The EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) Multiplier is a valuation ratio that compares a company's enterprise value to its EBITDA. It's commonly used to assess whether a company is undervalued or overvalued relative to its peers.

2. How Does the Calculator Work?

The calculator uses the EBITDA Multiplier formula:

Where:

• Enterprise Value — Total company value including debt and equity
• EBITDA — Earnings before interest, taxes, depreciation, and amortization

Explanation: The multiplier shows how many times EBITDA the enterprise is worth. Lower multipliers may indicate better value.

3. Importance of EBITDA Multiplier

Details: The EBITDA multiplier is crucial for company valuation, mergers and acquisitions, investment analysis, and comparing companies within the same industry.

4. Using the Calculator

Tips: Enter enterprise value and EBITDA in the same currency. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good EBITDA multiplier?
A: It varies by industry, but typically 4-6x is average. High-growth industries may have higher multipliers.

Q2: How does EBITDA multiplier differ from P/E ratio?
A: EBITDA multiplier considers enterprise value (debt + equity) while P/E only considers equity value.

Q3: When is EBITDA multiplier most useful?
A: For capital-intensive businesses or when comparing companies with different capital structures.

Q4: What are limitations of EBITDA multiplier?
A: Doesn't account for capital expenditures, working capital needs, or future growth potential.

Q5: How often should EBITDA multiplier be calculated?
A: Regularly for valuation purposes, especially during financial reporting periods or M&A activities.