Additional Private Equity Metrics

Enterprise Value (EV)

The enterprise value of a portfolio company

EV = Equity plus net debt

Debt Capitalization

The percentage of Enterprise Value represented by Debt.

Debt Capitalization = debt/(equity + debt)

Equity Capitalization

The percentage of Enterprise Value represented by Equity.

Entry Capitalization = equity/(equity + debt)

Leverage

The ratio of Debt to Equity.

Leverage = Debt/Equity

Total Value

The sum of amounts returned from a deal (distributions) and valuation of the deal as at the track record date.

Total Value = Distributions + Valuation

EBITDA

A definition of profit based on Earnings Before Interest, Tax, Depreciation and Amortization.

EBITDA Margin

A portfolio company’s profit margin. Expressed as a percentage

EBITDA Margin = EBITDA/Revenue

Multiple

What multiple of EBITDA, the EV of a business represents.

Multiple = (Equity + Debt) / EBITDA

Debt Multiple

What multiple of EBITDA, the debt of a business represents.

= Debt/EBITDA

Investors who are required to select and monitor investment managers should develop a basic understanding of investment statistics. Quantitative tools can provide you with good insight that you can use in your qualitative interviews with managers and when monitoring your investments.