Why we subtract cash from debt while calculating enterprise value?
1 Answer(s)
Prabuddh Shiva
Enterprise value is essentially the takeover price of the company. So the cost would include market cap(buy shares) plus debt(inherit debt obligations since you own the company now), minority interest and preferred shares, minus total cash and cash equivalents(they are yous now). Total cash is minus because once the company is taken over, the cash will now belong to the acquirer. Hence minus from the cost,
In case of further clarification, feel free to contact.
Sep 26 2014 03:21 AM
In case of further clarification, feel free to contact.