Series 79 practice questioneasyEnterprise Value vs Equity Value
Which of the following is subtracted when moving from enterprise value to equity value?
- APreferred stock
- BMinority interest
- CNet debt✓ Correct answer
- DDeferred tax assets
Explanation
Why C — Net debt
To move from enterprise value to equity value, subtract total debt, preferred stock, and minority interest, and add back cash and cash equivalents. Net debt is total debt minus cash, so subtracting net debt alone is insufficient because preferred stock and minority interest must also be subtracted.
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
- How do non-operating assets, such as excess real estate, affect enterprise value calculations?
- Which factor most directly drives a higher control premium in public company acquisition transactions?
- Which item is included in the calculation of enterprise value, but not equity value?
- In comparable company analysis, which is the main difference between using enterprise value/EBITDA and price/earnings…
- Why is it important to adjust the financials of a target in precedent transactions for extraordinary items?
- If a company has in-the-money options outstanding, which method adjusts the share count to reflect potential dilution…
- Which component is NOT typically included in the calculation of a company’s weighted average cost of capital (WACC)?
- Which of the following is most often considered a reason to exclude a precedent transaction from a comparable set?