SHAREHOLDER EQUITY — VALUING YOUR COMPANY

In the above scenario, rather than alter the EBITDA number, an educated buyer would reduce the multiple because the quality of earnings is poor and the acquirer would inherit a significant project of reducing costs.

Further, the multiple may be affected by the position the fixed assets are in their life cycle, as determined by the detailed depreciation and amortization schedules. The shorter the estimated life of fixed assets, the less the quality of cash flows provided by depreciation and amortization.