medium · Investment Banking
What is the primary reason for subtracting cash in the Enterprise Value formula?
- The Income Statement includes interest income from cash in the EBITDA metric
- Cash is a liability that must be repaid to shareholders during an acquisition
- Cash is considered a non-operating asset that an acquirer could use to immediately pay down part of the purchase price
- Subtracting cash helps to increase the value of the non-controlling interest
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