easy · Investment Banking implied-share-price
What is the primary reason for subtracting cash in the Enterprise Value formula?
- The Income Statement includes interest income earned on cash balances within the reported EBITDA metric
- Cash is treated as a liability that must be repaid directly to shareholders upon closing 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 from the formula helps to artificially increase the reported value of the non-controlling interest stake
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