Enterprise Value w/ Accounts Payable?
Hi,
I have a question regarding the Enterprise Value calculation. Simply put, it is equity value + Debt - Cash. I always reminded myself that it is the same as total assets minus cash, but now I have come to the conclusion that this is likely wrong for the reason that Accounts Payables and likely other posts are not included in the Enterprise Value calculation. Let's say I have 200 in real estate assets, 50 in accounts payables and 50 in long term debt. This would mean my Enterprise Value is 100 (equity) + 50 debt = 150, which does not reflect the total asset value of a house. I could understand Enterprise Value's point if it would simply be total assets minus cash, but now that posts like AP are not included I really do not see why you would calculate it.
I hope you can help me out.
When you talk about "debt" in the EV formula, that's only interest-bearing debt. So A/P, as an operating liability, wouldn't be included. If material, an adjustment might be made. In a more complex model (DCF, LBO), you can account for it in the FCF calculation, which ultimately feeds into EV.
http://aswathdamodaran.blogspot.com/2013/06/a-tangled-web-of-values-ent…
See this post by Damodaran. I believe it was on here once but I couldn't find it.
Culpa ea rerum et occaecati impedit repellendus sunt ad. Ipsa dolorem quis sit et. Reiciendis omnis qui in cumque officiis qui. Ratione est voluptas doloribus ut quia velit omnis.
Labore fuga magnam aut est. Sint pariatur cupiditate voluptatem maiores laudantium omnis. Ea sint et ex aliquid qui nesciunt nihil. Inventore ratione corporis sed voluptates debitis est officia.
Ad non facilis similique totam vel. Iusto magni culpa explicabo voluptatem consectetur animi voluptas veritatis. Esse voluptatibus itaque quaerat cupiditate ipsam mollitia qui hic. Quam asperiores praesentium sit. Quia illo aperiam corrupti sit deleniti.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...