Enterprise & Equity Value
If a company holds $0 debt but has a large cash balance and minority investments, can its enterprise value be LOWER than its equity value? Walk through it.
Model answer
Yes. With no debt and no preferred or minority interest, EV = Equity Value - Cash - Investments. Since cash and investments are subtracted, EV falls below equity value - this is common for cash-rich,…
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More from Enterprise & Equity Value
- What's the difference between enterprise value and equity value?
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- 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?
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