Calculating Enterprise Value

**vik589** Sat Aug 19, 2006 5:09 pm

Calculating Enterprise Value
Blast and Forum members,
I am new to this and i am learning how to calculate important Valuation ratios. I have a question about EV calculation. I understand that the formulae for EV calculation is as follows.

EV= Market Cap + Total Debt - Total Cash

I am confused as to what makes up Total Debt and Total cash.

a. Does Total cash only include cash and cash equivalents or does it also include accounts receivables.

b. Also for total Debt does is only include current portion of LT debt and LT debt or does it also include Accounts payable and other accrued liabilities.

**blast_investor** Sat Aug 19, 2006 7:08 pm

Re: Calculating Enterprise Value
Hi vik589,

a, that calculation of EV does not include accounts receivable. Only cash and short term investment is included.

b. Only LT debt is included. Current portion and account payable not not used in EV calculation.

For most of time, EV calculation in Yahoo finance is correct number.

vik589 wrote: Blast and Forum members,

a. Does Total cash only include cash and cash equivalents or does it also include accounts receivables.

b. Also for total Debt does is only include current portion of LT debt and LT debt or does it also include Accounts payable and other accrued liabilities.

**vik589** Sun Aug 20, 2006 11:09 am

Thanks Blast,
I bought this book Magic Numbers (33 Key ratios) by Peter Temple and for the EV calculation example in his book he uses short-term borrowing and current portion of LT debt along with the LT debt to calculate total debt. I'm a bit confused