what is exactly the EV formula?

quoted from textbook: “enterprise value is defined as the total market value of all sources of a company’s financing, including equity and debt”, however from mock, it seems EV doesnt include short term debt, and short term investment, though it does include long term investment.

who can kindly help on this clarification? thx a lot!

it’s suppose to be EV = Asset + Liab - Cash. It’s how much the buyer has to assume if the buyer were to take over the assets and assume the debt. I think it would include all liabs… not 100% certain though.

to the best of my knowledge, EV = market value of equity + market value of debt (ST and LT) (+ preferred equity (if applicable)) - cash & marketable securities

EV =MV Debt + MV Equity + minority interests + preferred shares - cash & st-invest

from 2012 mock afternoon session, the answer sheet implies “EV= long term debt + equity – cash – short term investment”, i check the textbook doesnt give a clear formula…this is so confusing…

Short term investments is another word for marketable securities (usually cash and cash equivalents and marketable securities are grouped together). As notmal with all recent cfa mocks they are just trying to be difficult for no reason

Just ran into this same issue doing the 2012 mock afternoon. They only included Long term debt in their enterprise value and exluded Notes Payable & Accounts Payable. Is that correct??

Yes, it excludes short-term obligations.

Similar problem with calculating Equity value from Firm value calculated using FCFF. CFAI deducts from Firm value LT debt, ST debt, notes payable and accounts payable, so all interest bearing and non-interest bearing liabilities.

Probably one has to memorize when to use which definition of “debt”…