NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
Company X has an enterprise value of Rs 2,400 crore, cash of Rs 200 crore, and total debt of Rs 600 crore. Its EBITDA is Rs 300 crore. What is its market capitalisation and EV/EBITDA multiple?
Market capitalisation is Rs 2,000 crore and EV/EBITDA is 8x. Since EV equals market cap plus debt minus cash, market cap is 2,400 minus net debt of 400. Dividing EV of Rs 2,400 crore by EBITDA of Rs 300 crore gives 8 times.
- ARs 2,000 crore and 8xCorrect
- BRs 2,800 crore and 8x
- CRs 2,000 crore and 9.33x
- DRs 2,800 crore and 9.33x
Explanation
EV = market cap + debt - cash, so market cap = 2,400 - 600 + 200 = Rs 2,000 crore. EV/EBITDA = 2,400/300 = 8x. Rs 2,800 crore comes from reversing the sign of net debt, and 9.33x from using market cap instead of EV.
Did you get it right without looking?
One question tells you little. A timed set on Terminology in Equity and Debt Markets shows your real accuracy, how long you take and where you lose marks.
More Terminology in Equity and Debt Markets questions
- A bond with a face value of Rs 1,000 pays an annual coupon of 9% and is currently trading at Rs 900. What is its current yield?
- A company's shares trade at Rs 240. Its trailing twelve-month earnings per share is Rs 12, and the book value per share is Rs 80. What are t…
- Company Veda Ltd reports: net profit Rs 90 crore, total shareholders' equity Rs 600 crore, 3 crore shares outstanding, market price Rs 450 p…
- A bond with a face value of Rs 1,000 pays an annual coupon of 8%. It is currently trading at Rs 800. What is its current yield?
- A company has 10 crore shares outstanding at a price of ₹200. It has total debt of ₹500 crore and cash and equivalents of ₹300 crore. Its EB…
- A stock has a face value of Rs 10 and trades at Rs 450. The company's net profit after tax is Rs 60 crore and it has 4 crore shares outstand…