Sunday, 30 June 2013

A tangled web of values: Enterprise value, Firm Value and Market Cap

By Aswath Damodaran

Investors, analysts and financial journalists use different measures of value to make their investment cases and it is not a surprise that these different value measures sometimes lead to confusion. For instance, at the peak of Apple's glory early last year, there were several articles making the point that Apple had become the most valuable company in history, using the market capitalization of the company to back the assertion. A few days ago, in a reflection of Apple's fall from grace,  an article in WSJ noted that Google had exceeded Apple's value, using enterprise value as the measure of value. What are these different measures of value for the same firm? Why do they differ and what do they measure? Which one is the best measure of value?

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