This valuation ratio is similar to, but a little simpler than EV/EBITDA, with which it shares the advantage of valuing a company regardless of its capital structure It is:


EV/EBIT is not much used in practice. It is almost has hard to calculate as EV/EBITDA because it requires calculating an enterprise value. Having done this one might as well go on and do the comparatively simple addition of depreciation and amortisation to EBIT. We can then use EV/EBITDA with its other advantages.

EV/EBITDA is generally preferable, but sometimes the information needed is not available: for example, when doing a sum-of-parts valuation and divisional/subsidiary depreciation and amortisation numbers are not available.

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