In valuations, value ranges are shown for changes in the discount rate and long-term growth rate; in acquisitions, for changes in EBITDA and the multiple. Sensitivity analysis reveals which assumption the decision depends on most.
Related terms
Financial modellingBuilding a model that forecasts the future financial performance of a company or project, with linked income statement, balance sheet and cash flow.Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.Cost of capitalThe minimum rate of return investors expect from an investment in return for the risk they take.Earn-outA mechanism under which part of the purchase price is paid depending on the target company reaching certain performance targets after closing.EBITDAEarnings before interest, tax, depreciation and amortisation; used as an indicator of the cash-like profitability generated by a company's core operations.
Last updated: October 22, 2026 · This definition is for general information only.