how to calculate?


also tell me ....if u r given with a market cap of a company ,balance sheet and a P&L of a company.....how will u calculate enterprise value?

EV= Equity Vale+Debt+Preferred Stock+Minority Int-Cash

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Enterprise value is calculated as

Market Cap + Net Debt

Market cap = share price * fully diluted shares

Net debt = all debt(including preference shares excluding in the money convertibles)+ preference shares - Cash and cash equivalent

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Enterprise value is a figure that, in theory, represents the entire cost of a company if someone were to acquire it. Enterprise value is a more accurate estimate of takeover cost than market capitalization because it takes includes a number of important factors such as preferred stock, debt, and cash reserves that are excluded from the latter metric.

(In other words, enterprise value is what it would cost you to buy every single share of a company’s common stock, preferred stock, and outstanding debt. The reason the cash is subtracted is simple: once you have acquired complete ownership of the company, the cash becomes yours)

Cash and Cash Equivalents: Once you’ve purchased a business, you own the cash that is sitting in the bank. After acquiring complete ownership, you can simply take this cash and put it in your pocket, replacing some of the money you expended to buy the business. In effect, it serves to reduce your acquisition price; for that reason, it is subtracted from the other components when calculating enterprise value.

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Brillant Alex

You have explained the concept in the most comprehensive and simplest way possible.


Thanks -this forum is a great learning and educating platform.

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