Question

Assuming a company has no other funding sources other than debt and common equity, what is the difference between enterprise value and equity value

Answer 1

Incomplete question. The options:

a. Long term debt

b. All interest-bearing debt

c. All interest-bearing debt less cash and equivalents

d. Cash

Answer:

c. All interest-bearing debt less cash and equivalents

Step-by-step explanation:

Remember, the term enterprise value refers to any core asset value of a company that is needed for the company's business operation which is shared or is available to all shareholders of the company.

Whereas the equity value refers to any value attributed or available to only equity investors.

So in calculating the difference between the two, all interest-bearing debt is deducted (less) from cash and equivalents.