EV

Question 1

What is equity value?

Answer 1

Stock price * shares outstanding (a.k.a. market cap)

Question 2

What is enterprise value?

Answer 2

Equity value + Debt + Preferred Stock + Non-Controlling Interest - Cash & Cash Equivalents

Question 3

How to calculate diluted shares

Answer 3

(Current share price - Price you will receive) * number of options) / current share price

Question 4

When to use enterprise value vs. equity value

Answer 4

If the denominator includes interest income and expense then use equity value

EV / Net Income
EV / Free Cash Flow to Equity

Question 5

When do you subtract an item in enterprise value?

Answer 5

When it saves you money or potentially gives you extra cash

Question 6

When do you add an item in enterprise value?

Answer 6

When it is something that must be paid immediately, or something long term that wouldn’t be paid out of the companies cash flows