4 ms·

That’s not how things work. Their market cap is price per stock * number of stocks (the theoretical price to buy Ford completely). You can also calculated thei

by gpt5 5y ago

That’s not how things work. Their market cap is price per stock * number of stocks (the theoretical price to buy Ford completely). You can also calculated their book value, which is their assets minus their liabilities, but that is smaller than their market cap (as it should be).

bryanlarsen 5y ago
That's exactly how it works. If you buy a house for $500k and have a $300k mortgage do you say the house is only worth $200k?
- nomoreplease 5y ago
  Not OP but.. There’s a difference between debts and assets though. Is the $160B debt equivalent to $160B in assets or did they screw up and overspend? If I bought a $500k for $1M then the next buyer can’t get it appraised for such
  - lotsofpulp 5y ago
    Especially if the house is theoretical, like Rivian’s products.
    - vmladenov 5y ago
      How are they theoretical? One literally drove past my house the other day when I was walking my dog. I found the headlights pretty amusing.
      - lotsofpulp 5y ago
        Until it is sold and in the hands of objective parties, I assume it is theoretical.
  - amcaskill 5y ago
    The amount owed to the creditors doesn’t change in that scenario. The screw up (assuming the market recognizes it) would destroy value for the equity holders. Another way to think about total enterprise value is that there are two groups of people who have a claim on the business: the equity holders and the creditors. In order to own the business free and clear, you need to buy both of their claims. The total equity claim is the market cap and the total creditor claim is the outstanding debt.
amcaskill 5y ago
Parent is referring to total enterprise value, which is the right way to compare the value of businesses with different amounts of leverage. Imagine if you bought a restaurant for $100 cash, and I bought an identical restaurant with $50 cash and $50 of debt against the business. Both restaurants are worth $100.

by gpt5 5y ago

bryanlarsen 5y ago

That's exactly how it works. If you buy a house for $500k and have a $300k mortgage do you say the house is only worth $200k?

nomoreplease 5y ago
Not OP but.. There’s a difference between debts and assets though. Is the $160B debt equivalent to $160B in assets or did they screw up and overspend? If I bought a $500k for $1M then the next buyer can’t get it appraised for such
- lotsofpulp 5y ago
  Especially if the house is theoretical, like Rivian’s products.
  - vmladenov 5y ago
    How are they theoretical? One literally drove past my house the other day when I was walking my dog. I found the headlights pretty amusing.
    - lotsofpulp 5y ago
      Until it is sold and in the hands of objective parties, I assume it is theoretical.
- amcaskill 5y ago
  The amount owed to the creditors doesn’t change in that scenario. The screw up (assuming the market recognizes it) would destroy value for the equity holders. Another way to think about total enterprise value is that there are two groups of people who have a claim on the business: the equity holders and the creditors. In order to own the business free and clear, you need to buy both of their claims. The total equity claim is the market cap and the total creditor claim is the outstanding debt.

amcaskill 5y ago

Parent is referring to total enterprise value, which is the right way to compare the value of businesses with different amounts of leverage. Imagine if you bought a restaurant for $100 cash, and I bought an identical restaurant with $50 cash and $50 of debt against the business. Both restaurants are worth $100.