= market value of company's common stock
+ market value of outstanding preferred stock
+ market value of debt
- cash and short term investment (cash equivalent)
It can be thought of as the cost of taking over a company.
The most widely used EV multiple is the EV/EBITDA multiple.
EBITDA measures a company's income before payments to any providers of capital are made.
The EV/EBITDA multiple is often used when comparing two companies with different capital structures.
Loss-making companies usually have a positive EBITDA
Loss-making companies usually have a positive EBITDA, which allow analysts to use the EV/EBITDA multiple to value them.
The P/E ratio is meaningless (negative) for a loss making company as its earnings are negative.