Glossary · market terms in plain English

EV/EBITDA

Enterprise value divided by EBITDA. Enterprise value is market capitalization plus net debt — the price of the whole business, borrowings included. EBITDA is earnings before interest, taxes, depreciation and amortization: a whole-business earnings measure, stated before interest because it belongs to lenders and owners together. The direction is the definition — the whole-business price on top, a whole-business earnings measure beneath it — which is what lets the multiple compare companies carrying very different amounts of debt. Written the other way up, it is a different measure — a rough earnings yield — not the multiple. Taught in: Financial statements II →