Fundamental Library

Accumulated Depreciation
Adjustments (Cash Flow from Operating Activities)
Advance from Customers
Asset Turnover
Bonus Issue
Book Value / Equity Capital
CAGR (Compound Annual Growth Rate)
Capital Work in Progress (CWIP)
Cash and Cash Equivalents
Cash Conversion Days
Cash Flow Per Share (CF/Share)
Cash From Financing
Cash From Investing
Cash From Operations
Changes in Working Capital
Common Sized
Consolidated Financial Statements
Current Assets
Current Investments
Current Liabilities
Current Ratio
Discount Rate
Discounted Cash Flow (DCF)
Dividend Yield
Effective Tax Rate
Employee Cost
Exceptional Items (Income Statement)
Executive Director
Face Value
Fair Value
FCF Per Share
FII (Foreign Institutional Investor)
Financial Leverage Multiplier in Du Pont Analysis
Free Cash Flow Yield
Government Holding
Gross Block
Implied Growth Rate
Independent Directors
Institutional Holdings
Interest Coverage Ratio
Interest Expense
Inventory Days
Long Term Loans & Advances
Long Term Provisions
Manufacturing Expenses
Market Cap
Net Block
Net Cash Flow
Net Profit
Non-Current Assets
Non-Current Investments
Non-Current Liabilities
Non-Executive Director
Non-Independent Directors
NPM (Net Profit Margin)
OPM (Operating Profit Margin)
Other Current Assets
Other Current Liabilities
Other Expense
Other Income
Other Non-Current Assets
Payable Days
Power Fuel Cost
Promoter Pledge
PV (Present Value)
Quarterly Results
Raw Material Cost
Receivable Days
Retail/Public Shareholding
Rights Issue
ROA (Return on Assets)
Secured Loans
Selling and Distribution Costs
SGA costs
Share Capital
Shareholding Pattern
Short Term Borrowings
Short term loan and advances
Short Term Provisions
Standalone Financial Statements
Stock Splits
Tax %
Total Expense
Trade Payables
Trade Receivables
Unsecured Loans


Explanation: EV/EBITDA is a financial tool used to gauge how a company’s value compares to its earnings before interest, taxes, depreciation, and amortization (EBITDA). Enterprise Value (EV) sums up the total worth of a company, including its market value, debts, and cash. Think of it as the full price tag if you were buying the whole company. EBITDA, on the other hand, serves as a measure of a company’s operating profitability before factoring in non-operating expenses. It is often utilized as a proxy for cash flow, reflecting a company’s fundamental profitability. EBITDA excludes certain non-cash expenses such as depreciation and amortization, which can fluctuate based on accounting methodologies, thereby providing a clearer view of a company’s core operational performance.

The EV/EBITDA ratio is calculated by dividing a company’s enterprise value by its EBITDA. It provides insight into how many times a company’s EBITDA covers its enterprise value, serving as a measure of valuation and financial health.

The EV/EBITDA ratio is particularly useful in situations where earnings are negative or distorted due to accounting irregularities, making the traditional Price-to-Earnings (P/E) ratio less meaningful. Since EBITDA excludes non-operating expenses and the effects of financial leverage, it provides a clearer picture of a company’s operating performance and financial viability, especially in industries with high levels of capital expenditure or cyclical earnings patterns. As a result, EV/EBITDA is commonly used by investors and analysts to assess the valuation of companies with inconsistent or negative earnings.

Example: TCS has an EV/EBITDA ratio of 21.73. This means that, based on TCS’s enterprise value and EBITDA, investors are willing to pay approximately 21.73 times TCS’s EBITDA to acquire the company. A higher EV/EBITDA ratio may indicate that the company is relatively expensive compared to its earnings, while a lower ratio may suggest that the company is undervalued or has stronger earnings relative to its valuation.

EV/EBITDA is commonly used in financial analysis to compare the valuation of companies within the same industry or sector, as well as to assess investment opportunities and acquisition targets. It provides a comprehensive measure of a company’s valuation and operating performance, taking into account both its financial structure and profitability.

You can view the EV/EBITDA value for any company on Radar under Valuation Ratios in the Ratios section.

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