Series 79 practice questioneasyEnterprise Value vs Equity Value
If a company has $30 million in cash, $50 million in debt, and $10 million in minority interest, which amount should be subtracted in the enterprise value calculation?
- ADebt
- BMinority interest
- CEquity value
- DCash✓ Correct answer
Explanation
Why D — Cash
Cash is subtracted from equity value to arrive at enterprise value. Forgetting to subtract cash overstates enterprise value, a common test mistake.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Collection, Analysis & Evaluation of Data questions
- A DCF model projects five years of unlevered free cash flows and a terminal value based on an exit EBITDA multiple.…
- Which of the following should be considered when selecting peer companies for a comparable company analysis in the tech…
- Which ratio best measures a company’s ability to pay interest on its outstanding debt?
- Which of the following most directly improves a company's cash conversion cycle?
- How should stock-based compensation be treated when calculating unlevered free cash flow for a DCF?
- A banker is constructing a set of precedent transactions but notices that one deal was for a company in bankruptcy. How…
- What is the main purpose of conducting an accretion/dilution analysis during a proposed transaction?
- Which of the following adjustments must be made to equity value to arrive at enterprise value if a company has a…