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Relative Valuation🔵 Intermediate

How Much Is a Business Worth Based on What It Earns?

EV/EBITDA and EV/EBIT: Comparing Whole Businesses

Enterprise value multiples let you compare businesses regardless of debt level. EV/EBITDA is the most widely used multiple in M&A and private equity.

EV/EBITDAEV/EBITEnterprise ValueM&ALBO

Live Result

$10

ƒ: (market_cap + debt - cash) / ebitdaraw: 10.0000

ƒ(x)

Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10

market_cap$

Equity market capitalisation

market_cap = 800

debt$

Total financial debt (market value)

debt = 400

cash

Cash and short-term investments

cash = 100

ebitda

EBITDA (trailing 12 months)

ebitda = 110

ebit

EBIT (operating income)

ebit = 80

💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10

⬇ Export Calculation

Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.

The exported file includes the formula in standard mathematical notation — you can paste it directly into Excel, Google Sheets, or back into FinanceSheep.

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Learn: EV/EBITDA and EV/EBIT: Comparing Whole Businesses

Relative Valuation · Educational Guide

The Core Idea

If Company A has no debt and Company B has $500M of debt, comparing their PE ratios is misleading — the debt burden already reduces B's earnings. EV multiples solve this by comparing the WHOLE business (including the debt) to earnings before interest.

How It Works

EV = market cap + debt − cash. EV/EBITDA measures total firm value relative to cash operating earnings. It's capital structure neutral, cross-border comparable, and the go-to metric for M&A. Typical EV/EBITDA ranges: utilities 8–12×, manufacturing 6–10×, tech 15–30×, retail 4–8×.

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Real-World Example: Market cap $800M + debt $400M − cash $100M = EV $1,100M. EBITDA $110M. EV/EBITDA = 10×. This means an acquirer buying the whole business (equity + assuming debt) pays 10 years of EBITDA.

How Much Is a Business Worth Based on What It Earns?

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