Why Is the EBITDA Multiple Used for Valuation Rather Than

question 58

Essay

Why is the EBITDA multiple used for valuation rather than sales or earnings?
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Definitions:

Operating Lease

An agreement enabling a party to rent an asset without the intention or requirement to purchase it at the end of the lease term.

Lessee's Income Statement

An income statement showing the financial results of a lessee's operations, including the impact of leasing costs.

Rent Expense

An operating expense incurred for the use of property or equipment, recognized over the period of the lease agreement.

Capital Lease

A lease agreement that allows a lessee to use an asset in exchange for payment, with terms that transfer substantially all risks and benefits of ownership.