Ratio Analysis
Valuations
Charting Technique
- Enterprise value denotes about the cost to acquire an entity
- In EV calculations all the Items considered at MARKET VALUE Not on BOOK value
- Cash is subtracted because Subsequent to purchase of entity when dividend paid to Investors, it declines\reduces the net cost of the entity
- Hence it doesn't include in calculation of EV
- Indeed Cash is not part of Business, it can be usable to clear DEBT, or to pay DIVIDENDS...
- Once we purchased the company, which is having DEBT(Loans, Bonds) we have to repay to the investors, as a owner of the endity
- Hence we need to add the DEBT to the cost of an entity while evaluating enterprise value
- The Proportion of share holdings other than company, the We need to consider those holdings as Minority Interest
- When company doesn't have ownership on 100% holdings, It assigns remant portion to Outsiders.,
Enterprise Value
Calculation of ENTERPRISE VALUE:
Participants of ENTERPRISE VALUE:
Why we SUBTRACT CASH?
Why we add DEBT while calculating ENTERPRISE VALUE?
Why we need to Deduct Minority Interest while evaluating Enterprise value?
Note:
Example:
