PROFIT MULTIPLE Definition

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PROFIT MULTIPLE: Profit and sales multiples are the most widely used valuation benchmarks used in valuing a business. The information needed are pretax profits and a market multiplier, which may be 1, 2, 3, or 4 and usually a ceiling of 5. The market multiplier can be found in various financial publications, as well as analyzing the sale of comparable businesses. This method is easy to understand and use. The profit multiple is often used as the valuation ceiling benchmark.

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REDEMPTION is the repayment of the principal amount of a debt or security at or before maturity (as when a corporation repurchases its own stock).

CURRENT LIABILITIES are liabilities to be paid within one year of the balance sheet date.

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