Today I saw in an article online the following statement:
"Almost half of Zynga's roughly $2.6 billion market cap consists of $1.28 billion in cash"
Can someone explain to me how the second part of the statement relates to the first? To my understanding market cap = total outstanding shares x stock price, what does amount of cash have to do with this?
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EV = mkt cap + debt - cash restated Mkt cap = EV - debt + cash
thus mkt cap is a direct function of the cash balance, and in this situation half of the mkt cap value is due to cash on the balance sheet. if all that cash magically disappeared tomorrow and had no other affect on the business you would expect mkt cap to drop by ~50%.
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