Enterprise Value Question
(Chimp, 13
Points)
on 3/28/11 at 3:23pm
When calculating enterprise value, do you include restricted cash? For my particular company, the restricted cash serves as cash collateral for its outstanding LCs






don't most companies have a
don't most companies have a minimum cash balance that they need to keep throughout the yr to purchase inventory, use or sg&a, LC's, etc? it wouldn't make sense to include that in net debt as the restricted cash could not be touched in an acquisition scenario.
ib07 wrote: When calculating
When calculating enterprise value, do you include restricted cash? For my particular company, the restricted cash serves as cash collateral for its outstanding LCs
When subtracting out cash from the total enterprise value I would only remove the cash portion that is a current/liquid asset. If it's restricted for a specific use I would classify that as Cash for X or Collateral Against Outstanding LCs or something. So I guess it's like Debt+Equity+Preferred Stock+Minority Interest, etc-NET CASH(Free Cash-Less Restricted Cash)
I would imagine that your
I would imagine that your restricted cash would be included under your Net Operating Working Capital, ie part of the enterprise value. Enterprise value is the value of operations, which is why we net out cash that is not required for operations. No one wants to pay for cash that is just sitting idle on the balance sheet.