Marc Vermut

"Actually, it's all about cash. In simplest terms, the value of a company (or financial instrument) is the present value of its future cash flows. That's because cash is (theoretically) distributable and a measure of wealth and value, and earnings is a measurement tool of performance. A multiple is the inverse of a discount rate applied to future cash flow (much more complicated in real practice). Different industries use different multiples as more accurate indicators of value (some use sales, some use EBIT, some use EBITDA). And, Fred, at Wharton, we used Brealey and Meyers, though my textbook is now very old, and sitting in my apartment." - Marc Vermut