Enterprise Value to Sales (Formula, Examples) | Valuation

Описание: In this video, we are going to dig deeper and understand Enterprise Value to Sales Ratio. Including some examples and many more.

𝐖𝐡𝐚𝐭 𝐝𝐨 𝐲𝐨𝐮 𝐦𝐞𝐚𝐧 𝐛𝐲 𝐄𝐧𝐭𝐞𝐫𝐩𝐫𝐢𝐬𝐞 𝐭𝐨 𝐒𝐚𝐥𝐞𝐬 𝐕𝐚𝐥𝐮𝐞 𝐑𝐚𝐭𝐢𝐨?
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This is an interesting ratio. This takes into account the enterprise value and then the EV is being compared with the sales of the firm or a company.

𝐄𝐧𝐭𝐞𝐫𝐩𝐫𝐢𝐬𝐞 𝐭𝐨 𝐒𝐚𝐥𝐞𝐬 𝐕𝐚𝐥𝐮𝐞 𝐑𝐚𝐭𝐢𝐨 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Enterprise Value = Market Capitalization + Outstanding Debt – Cash & Bank balances

𝐄𝐧𝐭𝐞𝐫𝐩𝐫𝐢𝐬𝐞 𝐭𝐨 𝐒𝐚𝐥𝐞𝐬 𝐕𝐚𝐥𝐮𝐞 𝐑𝐚𝐭𝐢𝐨 𝐄𝐱𝐚𝐦𝐩𝐥𝐞𝐬
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Below we have the following info:

Market Price of Share is 20/share
Outstanding Shares are 200,000 shares
Long term liabilities: 3000,000
Cash & Bank balances 50,000
Sales 2,000,000

Compute the Enterprise Value and the ratio of EV / Sales.
First, we will calculate the market capitalization by multiplying the outstanding shares with market price per share.

Market Price x Outstanding Shares = 20 x 200,000

𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝗮𝗽𝗶𝘁𝗮𝗹𝗶𝘇𝗮𝘁𝗶𝗼𝗻 = 4,000,000

Now, we have the market capitalization, we can calculate the enterprise value.
Market Capitalization + Long term liabilities - Cash & Bank balances
= 4,000,000 + 3000,000 - (50,000) = 6950000

𝗘𝗻𝘁𝗲𝗿𝗽𝗿𝗶𝘀𝗲 𝗩𝗮𝗹𝘂𝗲 (𝗘𝗩) = 6950000

So now we know the EV and the sales is already mentioned. So now, we can ascertain EV / Sales

Enterprise Value (EV) = 6950000
Sales = 2,000,000

𝗘𝗩 / 𝗦𝗮𝗹𝗲𝘀 = 3.48

As per the industry, investors must try to understand whether 3.48 is high or low ratio and after understanding this investor can decide whether to invest into a firm or company or not.

To know more about Enterprise Value to Sales Ratio, you can go to this 𝗹𝗶𝗻𝗸 𝗵𝗲𝗿𝗲: https://www.wallstreetmojo.com/enterp...

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