3 ms·
It's the value of the equity (shares); market cap completely ignores debt. Market cap is a good way to think about what the total value of a company's stock is
by eldavido 10y ago
It's the value of the equity (shares); market cap completely ignores debt.
Market cap is a good way to think about what the total value of a company's stock is, but a leveraged (indebted) company may have some of its "company value" "owned" by bondholders as well. EV is the total value, whereas MC is just the shareholders' part.
- rz2k 10y agoI feel like this shouldn't be a dumb question, but here it goes: So, how come people are purchasing equity without paying any attention to debt? I understand how different classes of shares may be equivalent in scenarios where a company is successful, but very different if it is failing. I also understand that the market has established a price for 0.01% of a company, and not necessarily a price for a much larger share.
- oli5679 10y agohttps://en.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theorem https://en.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theo...
- rz2k 10y agoHa, I wonder what the students in that class thought when the instructors were "too dumb" to teach the consensus understanding in corporate finance. That said, on Hacker News, subjects like company valuations seem to be discussed in terms that are more consistent with economics than what you typically hear from students of finance.
- deleted 10y ago[deleted]