EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortization. The most common operating profitability metric in PE. Used as the denominator in entry/exit multiples.
Entry Multiple / Exit Multiple
The EV/EBITDA multiple at which a fund buys (entry) and sells (exit) a company. IRR is highly sensitive to multiple expansion or compression.
IRR (Internal Rate of Return)
The annualized return on an investment. PE funds target 20-30%+ IRR. Driven by entry price, leverage, operational improvement, and exit timing.
MOIC (Multiple on Invested Capital)
Total return expressed as a multiple: exit value / invested equity. A 3.0x MOIC means you tripled your money. Used alongside IRR to evaluate returns.
Cash-on-Cash Return
Same concept as MOIC. Total cash received / total cash invested. Important for credit investments where timing of cash flows varies.
DSCR (Debt Service Coverage Ratio)
EBITDA / (interest + principal payments). Key credit metric. Lenders typically require 1.2x+ DSCR to ensure the business can cover its debt obligations.
PIK (Payment-in-Kind)
Interest that accrues to principal rather than being paid in cash. Common in leveraged loans when a company needs cash flow flexibility. Signals credit stress when added mid-deal.
Portco / Portfolio Company
A company owned by a PE fund. "Portco" is the shorthand everyone uses internally. "I worked on a portco deal" is how analysts describe operating due diligence work.
Dry Powder
Committed but uninvested capital. A fund with $2B dry powder has $2B available to deploy. High dry powder relative to peers creates pressure to invest.