BEST EXAMINERS
, Financial Analyst Latest 2024_2025 \With Well Explained Answers\
Guaranteed A+
What's the formula for Enterprise Value?
EV = Equity Value + Debt + Preferred Stock + Minority Interest - Cash
How do you calculate fully diluted shares?
Take the basic share count and add in the dilutive effect of stock options and any other dilutive
securities, such as warrants, convertible debt or convertible preferred stock.
Why do you subtract cash in the formula for Enterprise Value? Is that always accurate?
Cash is subtracted because it's considered a non-operating asset and because Equity Value implicitly
accounts for it.
It's not always accurate because technically you should be subtracting only excess cash - the amount
of cash a company has above the minimum cash it requires to operate.
Could a company have a negative Enterprise Value? What would that mean?
Yes. It means that the company has an extremely large cash balance, or an extremely low market
capitalization (or both). You see it with:
1. Companies on the brink of bankruptcy. 2. Financial institutions, such as banks, that have large cash
balances.
What's the difference between Equity Value and Shareholders' Equity?
Equity Value is the market value and Shareholders' Equity is the book value. Equity Value can never
be negative because shares outstanding and share prices can never be negative, whereas
1
, Financial Analyst Latest 2024_2025 \With Well Explained Answers\
Guaranteed A+
What's the formula for Enterprise Value?
EV = Equity Value + Debt + Preferred Stock + Minority Interest - Cash
How do you calculate fully diluted shares?
Take the basic share count and add in the dilutive effect of stock options and any other dilutive
securities, such as warrants, convertible debt or convertible preferred stock.
Why do you subtract cash in the formula for Enterprise Value? Is that always accurate?
Cash is subtracted because it's considered a non-operating asset and because Equity Value implicitly
accounts for it.
It's not always accurate because technically you should be subtracting only excess cash - the amount
of cash a company has above the minimum cash it requires to operate.
Could a company have a negative Enterprise Value? What would that mean?
Yes. It means that the company has an extremely large cash balance, or an extremely low market
capitalization (or both). You see it with:
1. Companies on the brink of bankruptcy. 2. Financial institutions, such as banks, that have large cash
balances.
What's the difference between Equity Value and Shareholders' Equity?
Equity Value is the market value and Shareholders' Equity is the book value. Equity Value can never
be negative because shares outstanding and share prices can never be negative, whereas
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