Which multiples would you use, and which value goes with which metric?
The numerator/denominator rule and awareness of sector-specific multiples.
Answer it out loud firstTake 30–60 seconds, as you would in the room. Then compare with the model answer.
Show the model answer
Match the value to the investors the metric belongs to. Metrics before interest — revenue, EBITDA, EBIT, unlevered free cash flow — go with enterprise value. Metrics after interest — net income, EPS, levered free cash flow, dividends, book value — go with equity value. Then use what the sector uses: P/E and price-to-book for banks, EV/EBITDAR for airlines and retailers, EV/reserves for oil and gas.
The full answer
| Metric | Belongs to | Multiple |
|---|---|---|
| Revenue | All capital providers | EV / revenue |
| EBITDA, EBIT | All capital providers | EV / EBITDA, EV / EBIT |
| Unlevered free cash flow | All capital providers | EV / UFCF |
| Net income, EPS | Shareholders | P/E |
| Levered free cash flow | Shareholders | FCF yield (on market cap) |
| Book equity | Shareholders | Price / book |
Sector habits
- Banks and insurers: P/E, P/B, P/tangible book — debt is their raw material, so EV makes no sense.
- Retail, airlines (heavy leases): EV/EBITDAR, with leases capitalised.
- Real estate: price to NAV, FFO yield.
- Oil & gas, mining: EV/reserves, EV/production alongside EBITDA.
- High-growth or loss-making tech: EV/revenue, often growth-adjusted.
The classic trap
Equity value / EBITDA mixes an after-debt value with a before-interest metric: a heavily indebted company looks cheap simply because its debt is missing from the numerator.
Mistakes to avoid
Using EV/EBITDA for a bank.
Computing "market cap / EBITDA".
Follow-ups they may ask
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