How to calculate company value based on EBITDA - how many times ?
|How the company worth has to be calculated based on EBITDA indicator ? How many times should I multiply EBITDA to get the enterprise value ?|
|EBITDA calculation is a quick and easy method to measure company's overall financial performance. Simply said, it is a measure of profitability, because it focuses on earnings before interest, tax, depreciation and amortization. It is often used to estimate the worth of a company, but it has its advantages and disadvantages.|
Advantages of EBITDA:
Disadvantages od EBITDA:
Considering the pros and cons, EBITDA calculation can provide an incomplete picture of company's financial performance. It also can be used to evaluate an approximate worth of a company, but it is not absolutely reliable for this purpose.
The calculation of EBITDA based company's value depends on the industry and the size of a company, so it can be equal from three to seven times EBITDA or even more. According to recommendations, in case of many companies, it should be equal to six or seven times EBITDA.
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