What is EV / EBITDA?

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  • @afro84 shareholders dont analyze companies from the same angle as investors or investment bankers do. EBITDA is a great figure, simply because it gives a good understanding of costs and margins. then if u want to look at interest rates, taxes, etc you have other multiples to play around with

  • Thanks for posting this and all the other videos.  Will certainly help with my exam studies.

  • Thanks for sharing!

    

  • Very good videos. As a lawyer working with companies aming to go public in a couple of years, I am using your videos to explain with apples how the company must work in order to be ready to deal with investors. Thanks!

  • afro84 - I agree that the EV/ebitda measure is certainly not perfect. However it is popular at the moment. EBITDA is indeed open to abuse by the directors of a company just as any other profit measure can be too. That's why you should never rely on a single ratio and always be suspicious when the directors want you to focus on a particular profit measure of their choosing....Tim.

  • I cannot for the life of me understand why, as a shareholder, I would want to ignore the cost of interest, tax and depreciation. Amortisation I can understand.

    1.) Ignoring interest allows the directors to take on lots of debt and then ignore the cost of that debt. Great for management, less so for the ordinary shareholder.

    2.) Ignoring tax is just as futile since it gives me a figure that I simply have no claim to!

    3.) Depreciation - So who pays to replace my business' assets then?

  • This could be extremely valuable information. Thank you very much!

  • Propnash. Yes that's right. Strictly speaking Enterprise value is Market cap + net debt. And net debt is debt minus cash (assuming the business carries any balance sheet cash). Cheers. Tim

  • when we calculate EV, don't we need to substract cash of the company .

    EV=MARKET CAP+DEBT-CASH

  • How can I calculate the price of the stock from the EV/EBITDA? Thank you in advance.

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