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NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

A company has 10 crore shares outstanding at a price of ₹200. It has total debt of ₹500 crore and cash and equivalents of ₹300 crore. Its EBITDA is ₹250 crore. What is its EV/EBITDA multiple?

EV/EBITDA is 8.8 times. Market capitalisation is ₹2,000 crore; adding debt of ₹500 crore and subtracting cash of ₹300 crore gives enterprise value of ₹2,200 crore, which divided by EBITDA of ₹250 crore gives 8.8.

  1. A8.8 timesCorrect
  2. B8.0 times
  3. C9.6 times
  4. D7.2 times

Explanation

Market capitalisation = 10 crore × 200 = ₹2,000 crore. EV = 2,000 + 500 − 300 = ₹2,200 crore. EV/EBITDA = 2,200 / 250 = 8.8 times. Ignoring net debt gives 8.0; adding cash instead of subtracting gives 9.6 (2,400/250).

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