Wall Street Redbook Practice Test 2025 – 400 Free Practice Questions to Pass the Exam

When calculating multiples in valuation, financial metrics reflecting company performance are typically included. This approach focuses on quantifiable measures such as earnings before interest, taxes, depreciation, and amortization (EBITDA), earnings per share (EPS), or revenue. These metrics provide a standardized way to assess a company's profitability, growth potential, and overall financial health, enabling a clearer comparison with other companies in the same industry or sector.

The purpose of using such financial metrics is to derive meaningful multiples, such as price-to-earnings (P/E) or enterprise value to EBITDA (EV/EBITDA), that can be used to evaluate whether a company is overvalued or undervalued relative to its peers. By relying on these metrics, investors and analysts can make informed decisions based on actual financial performance rather than abstract numbers.