Series 79 practice questioneasyComparable Company Analysis
Which of the following is the most commonly used enterprise value multiple in comparable company analysis?
- AEV/Revenue
- BEV/Net Income
- CEV/Book Value
- DEV/EBITDA✓ Correct answer
Explanation
Why D — EV/EBITDA
EV/EBITDA is the most widely used enterprise value multiple in investment banking because EBITDA is capital-structure neutral, tax-neutral, and eliminates differences in depreciation policies. This makes it ideal for comparing companies across different capital structures and tax jurisdictions. EV/Revenue is commonly used for high-growth or unprofitable companies, while EV/Net Income is not a standard metric since net income is an equity-level measure.
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