Valuation Question - What is considered to be cash equivalents?
In the EV calculation, what is considered to be cash equivalents? Is it only very short term and liquid investments?
Would you subtract long-term assets from the EV calc? For instance, bonds, pref shares intended to be held for a long time?
The reason I'm bringing this up is that if you don't subtract these longer term assets, can't you artificially increase the EV of a company by holding more long term securities instead of shorter term instruments?
Thanks.
Yes, you're correct. You have to subtract long-term/equity investments when calculating EV.
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