Enterprise & Equity Value
Can enterprise value ever be negative? What would that imply?
Model answer
Yes - if a company's net cash (cash minus debt) exceeds its equity value, i.e., market cap is less than net cash, then EV = equity value - net cash is negative. It typically signals a distressed or…
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More from Enterprise & Equity Value
- What's the difference between enterprise value and equity value?
- Why do you subtract cash when going from equity value to enterprise value?
- Why is enterprise value capital-structure neutral but equity value is not?
- A company issues $100 of new debt and holds the cash on its balance sheet. What happens to EV and equity value?
- Which valuation multiples pair with enterprise value vs. equity value, and why?
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