MV BV and EV

CFA Level II
#1

I’m confused between book value, market value and enterprise value (I think I’ve seen more similar stuff but I don’t remember now)

can anyone explain the difference please?

#2

market value=Market vlaue of Debt+ Market value of Equity

Enterprise Value= Market Value - Cash and cash equivalents

Book Value is the value of debt + equity that is presented in the most recent audited balance sheet of the firm

#3

Book value = Assets - Liabilities. Which is just usually Equity Value.

#4

Thanks for the input. However I still don’t get the rationale behind these definitions (especially on Book value which seems to have conflicting understanding from you guys)

Lets say my balance sheet consists of:

Asset: $3 cash, + $12 fixed assets (total $15) Liability: $2 payables + $8 debt (total $10) Equity: Asset-Liability = $5

So according to the formulas…

MV = $5 + $8 = $13 ? (what is the intuitive meaning of this $13 of my balance sheet? I can’t draw any meaning from it)

EV = $13 - $2 = $11 ? (again… looking at the breakdown of the BS, $11 seems to mean nothing to me…)

BV = $5 ? or $$13 ?

Thanks a lot

#5

Only book-value uses the balance sheet. The other 2 use market values (fair values).

Book value of equity = Assets - liability = $5

MV = Can’t answer because you haven’t provided market value of debt or equity (bookvalue of equity != MV of equity).

EV = MV - Cash.

#6

I just hit the book my explanation of BV is wrong.

Book Value = Assets (stated on Balance Sheet) - Liabilities (stated on Balance Sheet)

#7

Thanks a lot all, this clarifies a lot