COMPANY VALUE-EBITDA
One of the most frequently used market multipliers in many subjects such as company valuation, merger, acquisition, and comparison of debtor companies is the firm value / favorable ratio. A good understanding of this multiplier is vital in decisions about companies. If we look at it from the perspective of a capitalist, let's consider this ratio separately as numerator and denominator.
Firm Value (Market Value + Net Debt)
Firm value is found by adding net debts to the market value of the company. Here, the market value is formulated as capital * market price, while net debt is obtained by subtracting the company's cash and cash equivalents from the company's financial debts. A financier knows that when buying a company, he will get the net debts of the company completely with the value appraised by the market.
Favök (Profit Before Interest Amortization and Tax)
Also known as interest amortization and pre-interest earnings. It is generally found by adding depreciation to net operating profit, but formulas can also be used in a different way. As another method of calculation, it is also calculated by subtracting expenses according to their qualifications, excluding depreciation from gross profit. Favök is important for the cash flows obtained from the company's main activities.
As a result, FD / EBITDA calculates how long the shareholder who buys the company pays for the company with the profit obtained from the company's main activities. This ratio stands out in making more precise and correct decisions compared to other market multiplier ratios. For this reason, it stands out as the most used method by analysts together with discounted cash flows. When using this ratio, the average FD / EBITDA ratios of other companies in the same sector are taken into consideration, and future projections are calculated by looking at the company's own past FD / EBITDA ratio.
Below is the estimated FD / EBITDA figure according to the projection for our Çiğköfte company. In 2019, if the investor or investor wanted to buy our company, they would have to settle for an FD / EBITDA figure of 6.91, while in 2022 this rate drops to 4.52.
AUTHOR:
Yilmaz Altun
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