Enterprise Value Question
Hey WSO, I had a quick conceptual question that I am having difficulty grasping. If Enterprise value is defined as the value of the operating business (operating assets minus operating liabilities), why is debt included in the calculation of enterprise value from equity value? Is debt not considered an operating liability? Can someone help me explain how enterprise value is the value of the operating business, to all investors (including debt investors) if debt is not included in the calculation.
That's right, debt is not an operating liability. It's a source of finance. I would also be careful with saying enterprise value is only the value of operating business. Usually, nonoperating assets should be added as they are also "available to all investors"
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