what is 100 basis points in finance?

Question

alarm dealer transactions have multiples of 8x-11x EBITDA , while most integrator multiples tend to be about 100 basis points less.

I understand what multiples and EBITDA are. However I dont know what "100 basis points less" means. Does tat mean 7x ebitda multiple ? 6x ?

thnx

Answer 1

As I've heard it used, a basis point is 1/100th of a percentage point, so 100 basis points would be one full percentage point. So, for example, if the yield on a bond is 4.5% and then you hear that the yield has gone up 100 basis points, that means the yield is now 5.5%.

I've never heard it used in relation to multiples, but I'm guessing it would be basically the same - that 100 basis points less would mean that the multiple is 1x less. In your example, that would probably mean 7x-10x (compared to 8x-11x).

Answer 2

One basis point calculated the American way is 32 units of 8 ticks. First tick is 4/32, second 8/32, third 12/32 and so on till 1 basis point. One tick is 1/8th. The minimum price fluctuation is 1 tick or 1/8th.

Answer 3

1%