Market cap is the market value of the equity so if you want to establish the market value of the EV, you would use market cap. Book value of equity would give you the book value of EV
"Brilliant" is not the word to describe this video !!! Untill now, I used to feel a little overwhelmed whenever I came across the word Enterprise Value" thinking it to be rather complicated for a layman. BUT TODAY ITS SEEMS SO LOGICAL AND COMMON SENSE !!! cant praise as well as thank the guy explaining the concept, enough.Look forward to some other such awesome videos. KEEP IT UP. CHEERS DUDE !!!
its amazing to me that in such an opinionated subject, throughout these videos, he remained so impartial. Sure he said this sounds good or this sounds good but he never said anything concretely. Amazing series of videos
Sal you are a ledge! you explain EV the best... I never understood it till now and i have just taken my final chartered accountancy exams! Thanks to you I understand the difference between book value techniques and market value techniques...
I created my youtube account today, to thank you for the great video. Your videos summarized my year-long 2nd year university course. Thank you for taking time to create and share your videos.
I am only 3 mins into the video so I ask this question without viewing the full contents of the video. You say that EV + cash = Debt + market cap However, won't the market cap be different from the book value of shares? Therefore is it not incorrect to have market cap in the equation as opposed to tbe book value of equity?
@stefanboro. I would say that book value is only really important when trying to figure out the value of "capital intensive businesses". like a bank or any company that needs capital and assets to generate income/revenue, example: GE, CAT, BAC. Think about an internet company though, they are NOT a capital intensive business. Their profits are made from intellectual property and other such things. So in the case of a non-capital intensive business cash flow and income are more important. than BV
Are enterprice value and asset are same thing, when there is not extra cash? Reason I was asking this is because, 1. Asset = Liability + Equity 2. EV + Cash = Liability + Equity
What confuses me is similar to what confuses stefanboro above, I think. The balance sheet equation is for operating assets and equity, which are not the same, mathematically, as EV(the market value of the enterprise) and Mkt Cap. It seems to me the ratios of EV-to-OperatingAssets, and MktCap-to-BookValue (P/Bk?) should be significant. I have trouble with terminology when learning complicated new subjects.
very well done. Question: so EBITDA is the "raw cash" that a company makes. But technically, since EBITDA is NI + a bunch of added back line items, and NI isn't actually cash ( that's why analysts look at Price/Cash flow to put P/E in perspective) , then what is ebitda technically? isn't it just a theoretical profit number like NI but one that only excludes COGS and SG&A? also, i've herd that EBITDA is a proxy for cash flow. Which cash flow? OCF, or FCF? and how so? can you elaborate? Thnks
Hi. Regarding EBITDA, if D&A isnt cash out the door because cash was paid several years ago, then you should be starting with cash Revenue and cash expenses- see how messy this gets? Why not add back stock based compensation expense which is also non cash then? .... Though EBITDA is widely used, i am not a proponent and dont emphasize on it when i do valuations of fin stat analysis.
Hey guys this might be a stupid question, but I am a bit confused about what happens to retained earnings Sal says that Market Cap is equal to the equity on the left side of the picture he drew. But what happens to other items under shareholders equity such as retained earnings, preferred stock and stock options. Are they also accounted for in the EV calculation. Thanks
I know this is so so late but preferred stock is considered a debt in this case. They're treated like creditors when the company liquidates as they're usually paid first. The remaining convertible securities are included as equity (ie bonds etc).
The example of cash having gone out the door 20 years ago for a piece of equipment doesn't work for this example because it is a brand new pizza business...so?
![Lp. Сердце Вселенной #60 РОЖДЕНИЕ ЛОЛОЛОШКИ [Финал] • Майнкрафт](http://i.ytimg.com/vi/YoR0pAV9FVQ/mqdefault.jpg)
I'm just here for the EBITDA pronounciation, which occurs at 9:55
Market cap is the market value of the equity so if you want to establish the market value of the EV, you would use market cap. Book value of equity would give you the book value of EV
"Brilliant" is not the word to describe this video !!! Untill now, I used to feel a little overwhelmed whenever I came across the word Enterprise Value" thinking it to be rather complicated for a layman. BUT TODAY ITS SEEMS SO LOGICAL AND COMMON SENSE !!! cant praise as well as thank the guy explaining the concept, enough.Look forward to some other such awesome videos. KEEP IT UP. CHEERS DUDE !!!
its amazing to me that in such an opinionated subject, throughout these videos, he remained so impartial. Sure he said this sounds good or this sounds good but he never said anything concretely. Amazing series of videos
Sal you are a ledge! you explain EV the best... I never understood it till now and i have just taken my final chartered accountancy exams!
Thanks to you I understand the difference between book value techniques and market value techniques...
I created my youtube account today, to thank you for the great video. Your videos summarized my year-long 2nd year university course. Thank you for taking time to create and share your videos.
This is a fantastic explanation of EBITDA. Thank you!
dude you are a freaking genius. i am so jealous and am going to watch all your videos. especially the finance related material
you sal deserve the nobel prize for education!!!
Awesome clarity and ease of talking , the best part is it looks natural
Atul
really have no words...simply OUTSTANDING!!!!!...Cheers!!! Sal.
This was more than smart - thank you!
you are awesome! it would be nice if you did such line by line explanation of "typical" balance sheets and cash flow statements too!
Page 431
fatuity = n, pl fatuities. 1 inanity. 2 a fatuous remark, act, sentiment, etc.
More Valuation videos please!!!!!!!
Was of great help. Thank you :)
I want to draw as well. What is this program?
3:44 what if the enterprise value is negative? What happens then?
I am only 3 mins into the video so I ask this question without viewing the full contents of the video.
You say that EV + cash = Debt + market cap
However, won't the market cap be different from the book value of shares?
Therefore is it not incorrect to have market cap in the equation as opposed to tbe book value of equity?
cant wait for the next video
@stefanboro. I would say that book value is only really important when trying to figure out the value of "capital intensive businesses". like a bank or any company that needs capital and assets to generate income/revenue, example: GE, CAT, BAC. Think about an internet company though, they are NOT a capital intensive business. Their profits are made from intellectual property and other such things. So in the case of a non-capital intensive business cash flow and income are more important. than BV
Are enterprice value and asset are same thing, when there is not extra cash?
Reason I was asking this is because,
1. Asset = Liability + Equity
2. EV + Cash = Liability + Equity
What confuses me is similar to what confuses stefanboro above, I think. The balance sheet equation is for operating assets and equity, which are not the same, mathematically, as EV(the market value of the enterprise) and Mkt Cap. It seems to me the ratios of EV-to-OperatingAssets, and MktCap-to-BookValue (P/Bk?) should be significant. I have trouble with terminology when learning complicated new subjects.
How does this guy actually know everything
very well done. Question:
so EBITDA is the "raw cash" that a company makes. But technically, since EBITDA is NI + a bunch of added back line items, and NI isn't actually cash ( that's why analysts look at Price/Cash flow to put P/E in perspective) , then what is ebitda technically? isn't it just a theoretical profit number like NI but one that only excludes COGS and SG&A?
also, i've herd that EBITDA is a proxy for cash flow. Which cash flow? OCF, or FCF? and how so? can you elaborate? Thnks
Closest to opcashflow probably
Hi. Regarding EBITDA, if D&A isnt cash out the door because cash was paid several years ago, then you should be starting with cash Revenue and cash expenses- see how messy this gets? Why not add back stock based compensation expense which is also non cash then? .... Though EBITDA is widely used, i am not a proponent and dont emphasize on it when i do valuations of fin stat analysis.
Hey guys this might be a stupid question, but I am a bit confused about what happens to retained earnings
Sal says that Market Cap is equal to the equity on the left side of the picture he drew. But what happens to other items under shareholders equity such as retained earnings, preferred stock and stock options. Are they also accounted for in the EV calculation.
Thanks
I know this is so so late but preferred stock is considered a debt in this case. They're treated like creditors when the company liquidates as they're usually paid first. The remaining convertible securities are included as equity (ie bonds etc).
Fundamental Analysis Vids Khan
Hi...Can someone please tell me if it is correct to include the royalty in the calculation of the EBITDA? Thanks in advance.
royalies is open i think. you pay it for yout operation
OPEX*
+Junyu Lee Thank you very much!
Recording in Mono again?
@elfenelfenelfen I agree, he is amazing!
what is SG&A in the balance sheet stands for?
Sales, general and administrative expenses
@@gabi1198m does that include salary, bonuses, contributions to pension plan and employment insurance etc?
Ok 5 is good. What is bad? How about 11?
The example of cash having gone out the door 20 years ago for a piece of equipment doesn't work for this example because it is a brand new pizza business...so?