Post by @julietmackayy

Starting a new series: Wall Street Math! Helping you prep and crush any finance interview. Full answer below 💸✨ 50mm shares x $20 = $1,000mm market cap $1,000mm market cap + $300mm debt - $150mm cash = $1,150mm Step one is the trap! Interviewers love giving you share count and price instead of market cap to see if you catch it. Market cap is the value the public market places on the company’s equity. It’s shares outstanding multiplied by share price. Enterprise value (TEV) is different. It captures the value of the business to all capital providers, not just equity investors. TEV = equity value + debt + preferred stock + noncontrolling interest - cash So why do we subtract cash? Technically, because cash is a non-operating asset. TEV is meant to capture the value of the operating business, and cash sitting in the bank doesn’t generate operating earnings. The way I actually think about it: You pay $1bn for the equity, take on the $300mm of debt, and the $150mm of cash in the bank is now yours. Net cost: $1,150mm. The shortcut for interviews: TEV = what you pay + what you assume - what you get back Most people memorize the formula and freeze when someone asks why cash comes out. Say it out loud until it’s automatic. One note: in theory, you’d subtract excess cash rather than all cash. Save that for the harder version. Follow for more! The next one’s harder. 👀 #investmentbanking #valuation #technicalinterview #privateequity #wallstreetmath