What is the purpose of the enterprise value measure?
A)To estimate the total current market value of a firm's outstanding shares of common and preferred stock
B)To estimate the cash required to purchase all of the outstanding stock of a firm as well as pay off the firm's interest bearing debt
C)To measure the current market value of all outstanding debt
D)To measure the relationship between the current market value of a firm's equity and its book value
E)To estimate the amount of cash needed to purchase sufficient shares of stock to be elected to the firm's board of directors

Question

Quizplus · Accepted Answer

The purpose of the enterprise value measure is to estimate the cash required to purchase all of the outstanding stock of a firm as well as pay off the firm's interest bearing debt. This is because enterprise value takes into account the market value of a firm's equity as well as its debt, preferred stock, and other obligations, giving a more comprehensive valuation of the firm's total worth.

What Is the Purpose of the Enterprise Value Measure