Question about WACC
When discerning the book value of debt for WACC, do you look at the book value of ALL liabilities including current liabilities, or do you just look at the book value of Long-Term Liabilities.
Thanks in advance for anybody willing to help.
you generally want the market value, but book value serves as a decent proxy for the market value (for debt only, not equity)
in my experience, when finding the value of the debt, look at anything that is debt...long term or short term. don't include all liabilities since you want to exclude accounts receivable etc
Im assuming you mean accounts payable?
I was under the impression you focus on long-term debt and ignore all current liabilities.
From my experience (classroom & projects) exclude all current liabilities
Current portion of debt is either your service of that debt (making interest or coupon payments) or redeeming/repaying some amount of principal (which could be for a litany of reasons: desire to de-leverage, PIK note, some sort of covenant stipulation). That said including current portion of debt doesn't make much sense seeing as it won't be part of total debt the proceeding fiscal quarter.
Current portion of debt is the total repayment liability over the forward twelve months, not quarter. You include all interest-bearing liabilities in the total debt -- alex has got it right above me.
usually includes all interest bearing liabilities...
Hic ut eligendi aut dicta. Sint consectetur nemo laboriosam ipsam et. Suscipit ratione animi quaerat inventore.
Architecto rem pariatur nisi expedita consectetur delectus. Sapiente doloremque enim et enim voluptatem officiis excepturi dolor. Nemo autem voluptatum ullam adipisci.
Facere error voluptatum aut nam quam. Et molestiae optio sapiente est unde fugiat enim.
Ipsa sequi quos doloribus ipsam quod est. Dolor esse dolor voluptatibus.
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...