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  "notes": "Includes a specific formula for adjusting sales multiples based on operating margins and a theoretical formula for EV/EBITDA.",
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      "text": "7 For further discussion, see our report Valuation and Accounting Briefing No. 3: EBITDA Multiples and Capital Intensity, February 1999, available at ubswarburg.com/research/gvg.",
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      "text": "Sales multiples cannot be compared where operating margins differ",
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      "text": "EBITDA does not include the cost of replacing capital",
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      "text": "EBITDA is a proxy for operating cash flow, and EV/EBITDA - probably the most popular EV multiple - is a price to cash flow multiple. Its popularity stems from the fact that it is unaffected by differences in depreciation policy and appears unaffected by differences in capital structure.",
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      "text": "However, while EBITDA is closer to cash flow than other profit measures it is not a true cash flow, as it does not incorporate either asset depreciation or capital expenditure. Also, EBITDA is a pretax measure, whereas management can potentially add value through skilled tax management.\n\nEV/EBITDA is affected by a firm's level of capital intensity (measured as depreciation as a percentage of EBITDA). All things being equal, higher capital intensity results in a lower EV/EBITDA multiple.",
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      "text": "Margin differences. Sales multiples cannot be directly compared across businesses where operating margins differ. Rough comparability can be obtain by adjusting the sales multiple to (Benchmark company sales multiple) x (target company sales multiple) / Benchmark company operating margin",
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      "text": "Formula: EV/EBITDA = (ROIC - g) / (ROIC x (WACC - g)) x (1 - T) x (1 - D)",
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      "text": "Definition: Core EV/earnings before associates, interest, tax, depreciation, amortisation, non-cash changes in provisions and before reported exceptional items.",
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