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What do Equity Value and Enterprise Value MEAN? Don’t explain how you calculate them – tell me what they mean!
Why do you use both Equity Value and Enterprise Value? Isn’t Enterprise Value more accurate?
Why do you pair Net Assets with Common Shareholders in Equity Value, but Net Operating Assets with All Investors in Enterprise Value? Isn’t that an arbitrary pairing?
What’s the difference between Current Enterprise Value and Implied Enterprise Value?
Why might a company's Current Enterprise Value be different from its Implied Enterprise Value?
Why do you subtract Cash, add Debt, and add Preferred Stock when moving from Equity Value to Enterprise Value in the “bridge”?
You're about to buy a house using a $600K mortgage and a $200K down payment. What are the real-world analogies for Equity Value and Enterprise Value in this case?
Could a company's Equity Value ever be negative?
Could a company's Enterprise Value ever be negative?
Why do financing events such as paying Dividends or issuing Debt not affect Current Enterprise Value?
You estimate a company’s Implied Value with Company Value = Cash Flow / (Discount Rate – Cash Flow Growth Rate), where Cash Flow Growth Rate < Discount Rate. Will this give you the company’s Implied Equity Value or Implied Enterprise Value?
If financing events do not affect Current Enterprise Value, what DOES affect it?
Is it possible for a single change to affect both Current Equity Value and Current Enterprise Value?
Why does Enterprise Value NOT necessarily represent the "true cost" to acquire a company?
In theory, if Companies A and B are the same in all respects, but Company A is financed with 100% Equity, and Company B is financed with 50% Equity and 50% Debt, then their Enterprise Values will be the same. Why is this NOT true in reality?
What about private companies? How do the concepts of Equity Value and Enterprise Value work there?
A company issues $200 in Common Shares. How do Equity Value and Enterprise Value change?
A company issues $200 in Common Shares, and it uses $100 from the proceeds to pay Dividends to the common shareholders. How does everything change?
The company decides to use the $200 in proceeds from new Common Stock to acquire another business for $100 instead. How does everything change?
What if the company uses that same $100 from new Common Stock to acquire an Asset rather than an entire company?
What happens if this company issues $200 in Debt to fund a $100 Asset acquisition instead?
A company issues $200 of Debt to fund a $200 Equity Purchase Price acquisition of a company with $150 in Common Shareholders’ Equity. How do Equity Value and Enterprise Value change, considering that the acquirer must create Goodwill?
A company issues $100 in Preferred Stock to purchase $50 of PP&E. How do Equity Value and Enterprise Value change?
Now the company issues $100 in Preferred Stock to repurchase $50 of Common Stock. How do Equity Value and Enterprise Value change?
A company issues $150 of Debt and $50 of Common Stock to acquire $175 of PP&E and $25 of Short-Term Investments. How do Equity Value and Enterprise Value change?
Current Equity Value represents the Market Value of ALL Assets. But if that’s the case, why doesn’t a $100 Debt issuance boost Equity Value? The company receives $100 in extra Cash from this issuance, which should boost its Total Assets.
A company purchases $100 of Inventory using Cash. How do Equity Value and Enterprise Value change?
Now assume the Inventory is sold for $200 and walk me through how the entire process from beginning to end affects Equity Value and Enterprise Value.
A company collects $200 of cash from a customer upfront for a service that it has not yet delivered. How do Equity Value and Enterprise Value change?
Now, the company delivers the service to the customer and recognizes the $200 as Revenue, along with $100 in Operating Expenses. Walk me through how the entire process from beginning to end affects Equity Value and Enterprise Value.
A CEO finds $100 of Cash on the street and adds it to the company’s bank account. How do Equity Value and Enterprise Value change?
A company experiences a disaster at one of its factories and records a $100 PP&E Write-Down. It also decides to issue $50 in Common Stock to get the funds required to replace this factory in the future. How do Equity Value and Enterprise Value change?
A company has excess Cash. How do Equity Value and Enterprise Value change if the company uses the Cash to repay Debt vs. repurchase Common Stock?
A company issues a press release indicating that it expects its revenue to grow at 20% rather than its previous estimate of 10%. How does everything change?
What IS a valuation multiple?
How do you use valuation multiples in real life?
Why are valuation multiples and growth rates often NOT as correlated as you might expect?
You’re valuing a mid-sized manufacturing company. This company’s TEV / EBITDA multiple is 15x, and the median TEV / EBITDA for the comparable companies is 10x. What’s the most likely explanation?
Would you rather buy a company trading at a 10x TEV / EBITDA multiple, or one trading at a 5x multiple?
Walk me through how you calculate EBIT and EBITDA for a public company.
Is anything different under U.S. GAAP vs. IFRS for these calculations? Do the multiples differ at all?
How do you calculate “Free Cash Flow” (just FCF, not Levered or Unlevered FCF), and what does it mean? Are there any differences under U.S. GAAP vs. IFRS?
How do you calculate Unlevered FCF and Levered FCF, and how do you use them differently than normal Free Cash Flow?
10. If a company’s cash flow matters most, why do you use metrics like EBIT and EBITDA in valuation multiples rather than FCF or UFCF?
How do you decide whether to use Equity Value or Enterprise Value when you create valuation multiples?
If a company has both Debt and Preferred Stock, why is it NOT valid to use Net Income rather than Net Income to Common when calculating its P / E multiple?
Should you use Equity Value or Enterprise Value with Free Cash Flow?
What are the advantages and disadvantages of TEV / EBITDA vs. TEV / EBIT vs. P / E?
In the TEV / EBITDAR multiple, how do you adjust Enterprise Value?
If EBITDA decreases, how do Unlevered FCF and Levered FCF change?
When you calculate Unlevered FCF starting with EBIT * (1 – Tax Rate), or NOPAT, you’re not counting the tax shield from the interest expense. Why? Isn’t that incorrect?
When you create “forward multiples” based on projections for metrics such as Revenue and EBITDA, how do you adjust Enterprise Value? Do you project it forward as well?
Two companies have the same P / E multiples but different TEV / EBITDA multiples. How can you tell which one has higher Net Debt, assuming that each one has only Equity, Cash, and Debt in its capital structure?
Two companies have the same amount of Debt, but one has Convertible Debt, and the other has traditional Debt. Both companies have the same Operating Income, Tax Rate, and Equity Value. Which company will have a higher P / E multiple?
A company is currently trading at 10x TEV / EBITDA. It wants to sell an Operating Asset for 2x the Asset’s EBITDA. Will that transaction increase or decrease the company’s Enterprise Value and its TEV / EBITDA multiple?
Is it accurate to subtract 100% of the Cash balance when moving from Equity Value to Enterprise Value?
Why do you NOT subtract Goodwill when moving from Equity Value to Enterprise Value? The company doesn't need it to continue operating its business.
Why do you subtract only part of a company's Deferred Tax Assets (DTAs) when calculating Enterprise Value?
How do you factor in Working Capital when moving from Equity Value to Enterprise Value?
Why do you subtract Equity Investments, AKA Associate Companies, when moving from Equity Value to Enterprise Value?
Why do you add Noncontrolling Interests (NCI) when moving from Equity Value to Enterprise Value?
Should you add on-Balance Sheet Operating Leases in the Equity Value to Enterprise Value bridge?
At a high level, how do Pensions factor into the Enterprise Value calculation?
What is the difference between Basic Equity Value and Diluted Equity Value? What do they mean?
A company has 100 shares outstanding, and its current share price is $10.00. It also has 10 options outstanding at an exercise price of $5.00 each. What is its Diluted Equity Value?
A company has 1 million shares outstanding, and its current share price is $100.00. It also has $10 million of convertible bonds, with a par value of $1,000 and a conversion price of $50.00. What are its diluted shares outstanding and Diluted Equity Value?
A company has 10,000 shares outstanding and a current share price of $20.00. It has 100 options outstanding at an exercise price of $10.00. It also has 50 Restricted Stock Units (RSUs) outstanding. Finally, it also has 100 convertible bonds outstanding at a conversion price of $10.00 and par value of $100. What is its Diluted Equity Value?
This same company also has Cash of $10,000, Debt of $30,000, and Noncontrolling Interests of $15,000. What is its Enterprise Value?