Explanation:
The relationship between Enterprise Value (EV), Market Capitalization, Debt, and Cash is given by the formula:
EV = Market Capitalization + Market Value of Debt - Cash & Short-term Investments
Given:
$5 billion$43 billion$33 billionPlugging into the formula:
$33 = $43 + $5 - Cash
$33 = $48 - Cash
Cash = $48 - $33 = $15 billion
Therefore, the cash and short-term investments balance is $15 billion, which corresponds to option C.
Key Concept: Enterprise Value represents the total value of a company's operations, calculated as market capitalization plus debt minus cash. This formula is fundamental in corporate valuation analysis.
Ultimate access to all questions.
An analyst gathers the following information (in $billions) about a company:
| Market value of debt | 5 |
|---|---|
| Market capitalization | 43 |
| Enterprise value | 33 |
The balance (in $billions) of the company's cash and short-term investments is:
A
B
C
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