The Daily Technical #49: What is the difference between enterprise value and equity value?

Good morning. Welcome to the 49th edition of The Daily Technical. You’re here for one reason so let’s dive in.

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OVERVIEW OF YESTERDAY’S QUESTION
Which section of the cash flow statement captures interest expense?

The cash flow statement doesn't directly capture interest expense.

However, interest expense is recognized on the income statement and then gets indirectly captured in the cash from operations section since net income is the starting line item on the cash flow statement.

Common Mistakes

1. Ignoring how the income statement influences the cash flow statement. Always remember: net income is the starting point in cash flow from operations.

2. Stating that interest expense appears directly on the cash flow statement from operations. It's only reflected through net income adjustments.

TL;DR

• The cash flow statement doesn’t directly capture interest expense.

• Net income acts as a bridge between the income and cash flow statements.

• Interest expense gets indirectly captured in cash from operations.

TODAY’S QUESTION
What is the difference between enterprise value and equity value?

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THAT’S A WRAP
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The HirePrep Team