Common Valuation Multiples are an important tool used to evaluate the potential value of a business. They are based on a simple equation that provides an approximate measure of the market’s expectation of a company’s worth: Enterprise Value = Market Capitalization x Common Valuation Multiple. Essentially, valuation multiples serve as a benchmark for judging how similar companies have performed in the past and estimating how your own company might do in the future. This vital tool can help you make more informed decisions when it comes to pricing, investing, and negotiating transactions.