Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

Book Value Measure Value Measure

Bookvalueof capital=Book

valueofequity+Bookvalueof

debt

Firmvalue =Marketvalue

ofequity+Marketvalueof

debt

Book value of noncash

(invested)capital=Bookvalue

ofequity+Bookvalueofdebt

− Cash

Enterprise value = Market

value of equity + Market

value of debt − Cash

Book value of consolidated

capital=Bookvalueofequity

+Bookvalueofdebt−Cash+

Minority interests (book value)

Enterprise value = Market

value of equity + Market

value of debt − Cash +

Market value of minority

interests

Ineachcase,notethatwe areincluding inthebook value
only those items that are also included in market value
measure.Thatiswhythebookvalueofassetscannotbeused
inconjunctionwitheitherenterprisevalueorfirmvalueand
isbettermatchedupwiththeestimatedmarketvalueoftotal
assets.

Revenues

In the chapter on equity multiples, we noted that the
price-to-sales ratio, where the market value of equity is
divided by total revenues, is inconsistently defined. Since
revenuesaregeneratedfortheentirebusiness,amuchmore
consistent version of the multiple would be obtained by
dividingenterprisevaluebytotalrevenues.Aswithearnings,
though, cross holdings in other companies can skew this
multiple, and the following adjustments are in order: