Series 79 practice questioneasyEnterprise Value vs Equity Value
Which of the following adjustments is made when calculating enterprise value from equity value?
- ASubtract accounts receivable
- BAdd inventory
- CAdd debt and subtract cash✓ Correct answer
- DSubtract current liabilities
Explanation
Why C — Add debt and subtract cash
Enterprise value equals equity value plus debt and minority interest, plus preferred stock, minus cash. The other adjustments do not reflect the standard calculation and may misstate the enterprise value.
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