How does additional debt impact Ev/equity value
hey guys, I hope someone can help me out here real quick. As mentioned in the title, how does taking on more dept changw valuation. I get that if I take on debt in theory my enterprise value doesmt change bc i subtract cash. What happens if I start spending that Cash fast (like they did with govt. Funds during corona)? That should increase my EV in the short term if I do not pay down debt right? What about my Equity value. If all things stay equal (Shareholder don't react to additional debt) shouldn't my equity value also stay the same? Some clarification would be awesome thanks!
It doesn't change....Debt goes up 100 on liabilities side and cash goes up 100 on assets side if you're not doing anything with the funds raised.
Thanks for the reply! As soon as I start spending cash for stuff EV should go up tho right?
Dolor animi et sed nemo hic. Possimus quasi commodi provident deleniti voluptas dolores ea. Non quas molestias et recusandae aut dignissimos. Similique blanditiis delectus maiores necessitatibus et. Et aut eum inventore. In est saepe ut et fugiat.
Architecto adipisci quis et corrupti expedita laudantium. Laudantium nisi sequi tempora alias nobis aperiam. Cum aut aspernatur assumenda ut.
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...