Hello fellow monkeys,
How to define EV?
M&I defines it as: Value of ONLY the core business operations, but to ALL investors (equity, debt, etc)
McKinsey defines it as: Summing the value of operations and nonoperating assets gives EV
For me, this seems like two different definitions. Would any of you fine gentleman take the time out of your day to help me out? :)
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I’m not sure you got the McKinsey reference right? You should deduct non-operating assets, i.e. cash to arrive to an EV
I believe M&I has the better definition. EV is essentially the market value of net operating assets of this company, which explains why we subtract the cash and short term investment and add non controlling interest.
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Nah I disagree the McKinsey one isnt right
I'm not sure where you're getting that McK definition. In their book "Valuation" (which btw is the best book on valuation to really understand concepts and how to connect theory to practical applications) they define EV as the sum of the firm's operating assets less its operating liabilities, which is the correct definition. I took a valuation class with the guy who wrote the book
McKinsey Valuation 7th edition page 180
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