Glossary
EV/EBITDA divides enterprise value by earnings before interest, taxes, depreciation, and amortization, offering a capital-structure-neutral view of valuation.
EV/EBITDA divides enterprise value (market cap plus net debt) by EBITDA, which is earnings before interest, taxes, depreciation, and amortization. Because the numerator includes debt and the denominator strips out financing and accounting effects, the ratio compares companies on a capital-structure-neutral basis.
It is popular for comparing companies with different debt loads or heavy depreciation, where a simple P/E can mislead. Like any multiple, it is a relative measure: meaningful only against a company's own history and its peers, and weaker for businesses where EBITDA poorly reflects real cash generation.
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