Section 1 - Instruction

In the previous unit, we covered the "what" and "why" of P/E, EV/EBITDA, P/B, and EV/Sales ratios. This session is all about practice—calculating these multiples and choosing the right one for the job.

Engagement Message

Ready to test your new skills?

Section 2 - Practice

Type

Fill In The Blanks

Markdown With Blanks

Let's practice calculating the P/B ratio.

A bank has a stock price of $40 per share. Its total assets are $10B and total liabilities are $8B, with 100M shares outstanding.

Book Value Per Share = ($10B - $8B) / 100M = [[blank:$20]]

P/B Ratio = $40 / $20 = [[blank:2.0]]

Suggested Answers

  • $20
  • 2.0
  • $40
  • 1.0
Section 3 - Practice

Type

Sort Into Boxes

Practice Question

For each company type, sort it into the box representing the most appropriate primary valuation multiple.

Labels

  • First Box Label: Best for EV/Sales
  • Second Box Label: Best for P/B

First Box Items

  • Unprofitable startup
  • High-growth tech
  • Loss-making biotech

Second Box Items

  • Commercial bank
  • Insurance company
  • Real estate firm
Section 4 - Practice

Type

Multiple Choice

Practice Question

You are comparing two profitable retail companies. Company A has a lot of debt, while Company B is debt-free. Which multiple would provide the fairest comparison of their core business operations?

A. P/E Ratio B. EV/EBITDA Ratio C. P/B Ratio D. EV/Sales Ratio

Suggested Answers

  • A
  • B - Correct
  • C
  • D
Section 5 - Practice

Type

Swipe Left or Right

Practice Question

Let's compare the focus of P/E vs. EV/EBITDA. Swipe each characteristic to the correct multiple.

Labels

  • Left Label: P/E Ratio
  • Right Label: EV/EBITDA Ratio

Left Label Items

  • Focuses on shareholder value
  • Uses net earnings (bottom line)
  • Can be distorted by debt levels
  • Simpler to calculate

Right Label Items

  • Focuses on total company value
  • Uses operating cash flow
  • Better for comparing capital structures
  • Accounts for debt and cash
Section 6 - Practice

Type

Fill In The Blanks

Markdown With Blanks

Let's calculate an EV/Sales multiple.

A startup has an Enterprise Value of $500M. It generated $50M in revenue last year.

Its EV/Sales multiple is [[blank:10.0x]]. If a comparable public company trades at an 8.0x EV/Sales multiple, this startup is valued at a [[blank:premium]].

Suggested Answers

  • 10.0x
  • premium
  • 5.0x
  • discount
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