medium · Investment Banking implied-share-price
In the calculation of Enterprise Value, why is Cash and Cash Equivalents subtracted from the total sum of claims?
- It is a non-operating asset that reduces the effective cost to an acquirer
- It represents a residual claim owed back to the company's shareholders
- It reflects the depreciated book value of the company's fixed equipment assets
- It ensures the P/E ratio stays consistent when comparing firms across industries
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