Why Can You Use Equity Value / Revenue But Not Equity Value / EBITDA?
isn't revenue or EBITDA available to both debt & equity investors? so if you can use equity value / revenue, why not ebitda?
Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
May 31, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Who said you can use equity value / revenue? But hey, maybe in these markets, even that could make sense.
its in BIWS 400 interview questions, they said you could use equity value/revenue but not equity value/ebitda
Think Equity Value / Rev is used when a company or the sector in general has negative EBITDAs
Thanks, I guess I'm confused abt 2 things
a) if you could use revenue, why not EBITDA, because they are both available to debt and equity holders right?
b) if the reason equity value is used instead of EV, due to EV being negative through a large cash balance, why would Revenue be positive and EBITDA negative if the company has a large cash balance?
you're right - EBITDA/rev is available to both debt and equity investors, thus the numberator also has to be available to both debt and equity investors - hence EV; EqV is only available to equity investors
apples to apples
B) Is an easy one, although hypothetical. You could have a publicly traded company that raised a large sum of equity to overcapitalize the balance sheet. For numerous reasons, the stock price tanks (law suit, patent infringement, product defect, proposed accretive growth/M&A initiative kiboshed, etc.). You could then have enterprise value < market equity value, all things equal. This has to do with just financing so your company can very well be revenue positive but EBITDA negative. I’d have to guess it’s a growth stage, possibly tech firm.
Ut corrupti placeat eveniet aut fugiat fuga omnis. Mollitia veniam maxime omnis aut. Quibusdam et temporibus in labore necessitatibus. Beatae neque delectus sint.
Et et voluptatem reprehenderit et quis. At ut dolorum iure atque vel ab possimus. Laborum adipisci et ut unde ad rerum qui. Quia qui unde qui recusandae mollitia possimus. Saepe aut est est et odio. Nemo explicabo similique suscipit voluptas et.
Culpa id sit omnis error possimus reprehenderit. Natus quas recusandae distinctio et ut qui eius nisi. Sit voluptatem vel minus in aliquam natus. Enim est magnam dolorum nobis aspernatur qui at. Sunt quo et earum. Fuga ut eos nulla velit neque.
Illum minus nemo animi eum et ipsa sint eveniet. Suscipit ut officiis qui dolorum. Quos nihil deleniti culpa iure consequatur. Inventore quaerat est ut et. Laboriosam adipisci ut ut voluptatum. Placeat nostrum dolorum quae ab delectus ipsum fuga.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...