Common Valuation Multiples

This question tests whether you know the core multiples bankers use to compare companies and how those metrics change depending on the business. In interviews, candidates are expected to understand the logic behind enterprise value, earnings, and revenue based multiples, as well as when a given multiple is more appropriate for a financial institution, an unprofitable company, or a capital intensive business. Interviewers ask this because relative valuation is a basic screening tool in banking, and you need to show that you can choose the right metric for the right industry and explain why it is relevant.