Series 79 practice questioneasyEnterprise Value vs Equity Value
When bridging from enterprise value to equity value, which item is typically subtracted from enterprise value?
- AAccounts receivable
- BInventory
- CPP&E
- DNet debt✓ Correct answer
Explanation
Why D — Net debt
Net debt (total debt minus cash) is subtracted to arrive at equity value. Subtracting other items like inventory would distort the valuation and fail to isolate the value attributable to shareholders.
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