Questions on Total Debt and EV
Three questions:
(1) What, specifically, do you include from Liabilities in calculating Total Debt, for the purpose of calculating EV? Similarly, what specifically do you include in the calculation of Non-convertible debt?
(2) How does Enterprise Value differ from Total Assets? I'd appreciate an explanation the theoretical difference (EV represents X, and Total Assets represents X), as well as an explanation of the quantitative difference between the two.
My basic understanding of this difference is that EV is what you would 'pay' to take control of a company, so it is essentially Total Assets - Cash (you can pocket the cash). Is it any more nuanced than that?
(3) Are the answers to (1) and (2) exactly consistent across all valuation methods?
Thanks.
http://macabacus.com/valuation/enterprise-value
total assets refers to book value of assets, enterprise value is the market value of assets, re-adjusted for non-operating assets.
You include any liabilities that have a claim on future free cash flows.
I was looking at that exact same page earlier, and it is helpful, but I'm still kinda lost. The Balance Sheet in their spreadsheets is so simplified as to work easily with their calculations; real liabilities statements don't look quite like that, and I'm having trouble deciding what to include in debt calculations.
Summing up the info from that site:
Net Debt = Total Debt - Cash and Cash Equivalents
Total Debt Includes: -Non-convertible debt
Total Debt Excludes: -Convertible (ITM) Securities
Cash Includes: -Available for Sale Securities and Marketable Securities
Cash Excludes: -Restricted Cash
(4) For Total Debt, what does "Non-convertible" debt consist of, exactly?
(5) Would you use these components of Liabilities: -Accounts Payable -Accrued Liabilities -Income Tax Payable -Insurance Reserves -Deferred Revenue -Deferred Income Taxes, net -Long-Term Debt -Other Long-Term Liabilities
In the calculation of Total Debt? Is it right to say that Total Debt = Total Liabilities - Convertible Debt?
(6) When would you add capital leases to total debt, and why?
(7) Why can't you simply subtract Cash from Total Assets to get EV?
Incidentally, can someone explain why the numbers on EDGAR, Google Finance, and Yahoo Finance are all different?
Lol I'm trying to put together a valuation right now, and it feels like I'm shoveling BS - there is no consensus on "consensus" numbers, I'm not sure of the exact numbers I should include in calculations.
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