Which statement about the list of common valuation multiples is accurate?

Which statement about the list of common valuation multiples is accurate?

• A. The listed common multiples are EV/Revenue, EV/EBITDA, EV/EBIT, P/E, and P/BV.
• B. The listed common multiples include P/S and EV/FCF.
• C. P/BV is not a common multiple.
• D. P/E is not a common multiple in the list.

Answer: (A)

Understanding valuation multiples: some look at the whole firm’s value (enterprise-value multiples) and others look at the equity value per share (equity multiples). The set EV/Revenue, EV/EBITDA, and EV/EBIT are enterprise-value multiples that relate the company’s total value to its revenue or operating earnings, giving a sense of how the market prices the firm as a whole. P/E and P/BV are equity multiples that relate stock price to per-share earnings or to book value, reflecting what investors are willing to pay for each unit of earnings or book value. This combination—EV/Revenue, EV/EBITDA, EV/EBIT, P/E, and P/BV—is widely used, so listing them together is accurate. Other common measures like P/S and EV/FCF are indeed used in practice, but they are not part of this specific listed set, which is why the statement that those belong to the listed group would be false.

Understanding valuation multiples: some look at the whole firm’s value (enterprise-value multiples) and others look at the equity value per share (equity multiples). The set EV/Revenue, EV/EBITDA, and EV/EBIT are enterprise-value multiples that relate the company’s total value to its revenue or operating earnings, giving a sense of how the market prices the firm as a whole. P/E and P/BV are equity multiples that relate stock price to per-share earnings or to book value, reflecting what investors are willing to pay for each unit of earnings or book value. This combination—EV/Revenue, EV/EBITDA, EV/EBIT, P/E, and P/BV—is widely used, so listing them together is accurate. Other common measures like P/S and EV/FCF are indeed used in practice, but they are not part of this specific listed set, which is why the statement that those belong to the listed group would be false.