A quick read on a company's worth.

• Author: Marshall, Jeffrey
• Position: Valuation - Brief article

Evaluating a company's enterprise value is an occupation for a lot of valuation consultants. But H. Lee Rust, a corporate finance consultant and author, contends that a rough estimate of market or enterprise value can be done quickly and simply.

Start with the last three year's income statements, Rust says. If sales and profits have been relatively stable, compute the average over that period for your net profits before annual interest, taxes, depreciation and amortization charges (EBITDA). If sales and profits have grown markedly, use the most recent year, not an average.

Multiply the EBITDA--which Rust calls "the nominal cash flow of the business"--by a factor between 3.5 and 6.5, he says. That number will vary, depending on competition and market leadership. If your company is in a highly competitive...