IntermediateMAD Academy0:46Valuation

What It Costs to Buy the Whole Thing

Enterprise value adds the debt you would inherit and subtracts the cash you would get, which is why it compares firms market cap cannot.

0:46 · 6 scenes

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What the Lesson Covers

  1. 0:00Buying every share does not mean owning the company free and clear.
  2. 0:05The adjustment. Add the debt you would take on, subtract the cash that comes with it.
  3. 0:14Why it changes the ranking. Two firms with identical market caps can cost very different amounts to own.
  4. 0:24Why it pairs with EBITDA. EV includes debt, so it must be compared to profit before interest. The pairing is deliberate.
  5. 0:33The caveat. EBITDA still ignores the cost of replacing assets, so capital-heavy firms look cheap.
  6. 0:41Price the whole business, then match the profit measure to it.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
What It Costs to Buy the Whole Thing — MAD Academy Training Video · MadStockAlerts