Series 79 practice questioneasyComparable Company Analysis - Multiples
Which market multiple is most commonly used in comparable company analysis for valuing a company with negative net income but positive EBITDA?
- APrice/Earnings (P/E)
- BPrice/Book
- CEV/EBITDA✓ Correct answer
- DDividend Yield
Explanation
Why C — EV/EBITDA
EV/EBITDA is commonly used when net income is negative but EBITDA is positive because it reflects operating performance regardless of capital structure. P/E is not possible with negative net income, and price/book and dividend yield are less relevant in this context.
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