EBIT/EV Multiple

A company’s EBIT/EV multiple is derived by dividing its earnings before interest and tax (EBIT; cf.) by its enterprise value. A company’s enterprise value is calculated by adding its market capitalisation (i.e. its share price multiplied by the number of shares) to its total market value of its debt net of the cash and cash equivalents sitting on the assets side of the balance sheet. It is a useful ratio for analysts to compare companies’ earnings yields without the complications of interest and tax expenses that differ across jurisdictions.