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  1. 027Equity value is Rs 1,000 crore. The company has Rs 400 crore of debt, Rs 150 crore of cash, Rs 100 crore of preference shares, Rs 50 crore of minority interest and a stake in an associate worth Rs 80 crore. What is enterprise value?Enterprise value and dilutionCoreBarclaysLondon · 2026

    Try it first

    Which of these items are subtracted on the way from equity value to enterprise value?

    Show the worked solution

    Enterprise value is Rs 1,320 crore. Start with equity value of Rs 1,000 crore. Add the claims that rank alongside or ahead of the ordinary shareholders on the consolidated business: debt of Rs 400 crore, preference shares of Rs 100 crore and minority interest of Rs 50 crore. Subtract what the company owns that is not part of that operating business: cash of Rs 150 crore and the Rs 80 crore associate stake. 1,000 plus 550 less 230 is 1,320.

    Why are some items added and others subtracted?

    Picture buying a shop. You pay the owner for her shares, but you also take on the bank loan, you owe the silent partner his share of the profits, and you inherit the cash in the till and the shop's small stake in the bakery next door. The price of the shop itself is what you paid, plus the loan and the partner's claim, minus the cash and the bakery stake, which you could sell on day one without touching the shop. Enterprise value is the value of the consolidated operating business, so you add every claim on that business and subtract every asset whose earnings sit outside it.

    Add every claim on the consolidated business, subtract what sits outside it, Rs crore1,000Equity valueordinary shares+400Debtclaim on EBITDA+100Preferencesharesclaim on EBITDA+50Minorityinterestclaim on EBITDA-150Cashoutside EBITDA-80Associatestakeoutside EBITDA1,320Enterprisevalue= 1,320claims added: +550assets outside: -230Net debt is 400 - 150 = 250; the associate's profit arrives below EBITDA, so its value comes out of EV
    Equity value of Rs 1,000 crore steps up by debt, preference shares and minority interest to Rs 1,550 crore and down by cash and the associate stake to an enterprise value of Rs 1,320 crore, because the additions are claims on consolidated EBITDA and the subtractions are assets whose income sits outside it.

    What is the test for each line?

    Ask where the item's earnings appear. Minority interestThe share of a consolidated subsidiary owned by outside shareholders. Its profit is inside consolidated EBITDA but belongs to someone else. is added because consolidation puts 100% of the subsidiary's EBITDA into the group figure even though outsiders own part of it; leave it out and EV is too small for the EBITDA it is set against. Preference shares are added because their dividend is a claim ahead of the ordinary equity. The associateA company in which the group holds a significant but not controlling stake, usually 20% to 50%, shown as one line of share of profit below operating profit. is subtracted for the mirror reason: its profits arrive as a single line below EBITDA, so its value must come out of the numerator to keep the multiple consistent. The rule is consistency between numerator and denominator: EV must describe exactly the business whose EBITDA you divide it by.

    ItemRs croreWhy
    Equity value1,000the ordinary shares, the starting point
    Debt+400a claim on consolidated EBITDA
    Preference shares+100a claim ranking ahead of the ordinary equity
    Minority interest+50outsiders' share of a subsidiary whose EBITDA is fully consolidated
    Cash-150not needed to run the business; netted against debt
    Associate stake-80its profit arrives below EBITDA, so its value comes out
    Enterprise value1,3201,000 + 550 - 230
    An illustrative bridge; every figure is from the question, not from any real company.
    The relationship
    EV=1,000+400+100+50−150−80=1,320EV = 1{,}000 + 400 + 100 + 50 - 150 - 80 = 1,320
    1,000equity value, the ordinary shares
    400 + 100 + 50debt, preference shares and minority interest: claims on the consolidated business
    150 + 80cash and the associate stake: value whose income is not in consolidated EBITDA
    What it says in wordsAdd the claims on consolidated EBITDA and subtract the assets whose income sits outside it.

    What would you say the question leaves out?

    Three things an interviewer may push on. Net debt here is Rs 250 crore, but a company needs some cash to run, so only the excess is truly surplus; most desks ignore that in an interview and net all of it, which is the assumption to state. Debt-like items such as unfunded pension deficits, lease liabilities and earn-outs also belong on the add side, and an interviewer who adds a convertible bond is checking whether you treat it as debt or as equity at the current share price. Give the Rs 1,320 crore, then name one debt-like item you would ask about, because the bridge in a live deal is longer than the one in the question. The multiple this feeds, EV/EBITDA, is only as clean as the bridge beneath it.

    Where candidates lose it

    The usual slip is the associate: candidates add it because it is an asset, or ignore it. It is subtracted, because its earnings sit below EBITDA and its value would otherwise inflate the multiple. The other common slip is subtracting minority interest because it belongs to outsiders; it is added, because the EBITDA it earns is counted in full.

    Say the test out loud before you add a single number: claims on consolidated EBITDA are added, assets whose income sits outside it are subtracted. Then the arithmetic is five steps and the answer, Rs 1,320 crore, is the easy part.

    What the interviewer asks next

    • If the company also carries Rs 60 crore of lease liabilities, does enterprise value change?
    • In a sum-of-the-parts valuation, where does minority interest appear, and with what sign?
    • The associate contributes Rs 10 crore of share of profit. If you kept the stake inside EV, what would you have to do to EBITDA?

    Asked at Barclays, Investment Banking, London, 2026 (Wall Street Oasis): 25 minutes of technical questions, covering basics: EV-to-Equity, Valuation, Multiples, Working Capital

  2. 075A tech company is worth 10x EBITDA and carries net debt of 7x EBITDA. If its enterprise value falls 10%, what happens to its equity value?Enterprise value and dilutionCoreMoelis & CompanyNew York · 2026

    Try it first

    Before you work it: how far does the equity fall?

    Show the worked solution

    The equity falls by about 33%, a third. Equity value is enterprise value less net debt: 10 minus 7, so 3 turns of EBITDA. A 10% fall takes enterprise value to 9 turns, and the lenders are still owed 7, so equity is 2 turns. From 3 to 2 is a one third fall. At 7 turns of debt on a 10 turn valuation the equity is a thin slice, and every move in the business's value is magnified 3.33 times on it.

    Why does the equity fall more than the business?

    Picture a flat bought for Rs 1 crore with a Rs 70 lakh loan. If the flat's price falls 10% to Rs 90 lakh, the bank is still owed Rs 70 lakh, so the owner's stake falls from Rs 30 lakh to Rs 20 lakh, a third. Net debt is fixed in rupees, so the whole of any fall in enterprise value comes out of the equity, and the thinner the equity slice, the larger the percentage hit. Here the equity is 3 turns of EBITDA under 7 turns of debt, so a 1 turn fall in value is a third of it.

    Debt does not move with the business, so the whole fall lands on the thin equity slicenet debt 7xequity 3xEV 10xBefore: EV 10xnet debt 7xequity 2xEV 9xAfter EV falls 10%: 9x10x7xEV -10%= -1 turndebt unchangedEquity: 3x to 2x-33%on a 10% fall in EVEV / equity = 10 / 3 = 3.33every 1% in EV is 3.33% in equity,in both directionsEV +10% would take equity to 4x: +33%EV -30% would wipe the equity outand start cutting into the debt
    With net debt fixed at 7 turns of EBITDA, a fall in enterprise value from 10 turns to 9 takes the equity from 3 turns to 2, a 33% fall, and the multiplier of 3.33 works the same way upwards, where a 10% rise in EV would lift the equity 33%.

    What is the general rule, and what does 7x tell you about sensitivity?

    The percentage move in equity is the percentage move in EV times EV over equity. At 10x EV and 7x debt that multiplier is 10 over 3, 3.33, so each 1% in enterprise value is 3.33% on the equity, up or down. That is what an interviewer means by sensitivity: 7 turns of leverage on a 10 turn valuation makes the equity a geared bet on the business. If EBITDA or the multiple slips 30%, the equity is worth nothing and the lenders start taking losses, which is why debt at that level prices as if it carried some of the equity risk.

    The relationship
    ΔEE=ΔEVEV×EVE=−10%×103=−33.3%\frac{\Delta E}{E} = \frac{\Delta EV}{EV} \times \frac{EV}{E} = -10\% \times \frac{10}{3} = -33.3\%
    Eequity value, EV less net debt, 3 turns of EBITDA
    EVenterprise value, 10 turns of EBITDA
    Delta EV / EVthe 10% fall in enterprise value
    What it says in wordsThe equity moves by the EV move scaled up by how many times EV covers the equity.
    Move in EVEV, x EBITDANet debt, x EBITDAEquity, x EBITDAMove in equity
    +10%11.07.04.0+33%
    +0%10.07.03.0+0%
    -10%9.07.02.0-33%
    -20%8.07.01.0-67%
    -30%7.07.00.0-100%
    With net debt fixed at 7 turns, each 10% step in enterprise value is a one third step in the equity, and a 30% fall in enterprise value leaves the equity worth nothing.

    Why does a banker ask a tech company this?

    Because 7 turns is a lot of debt for a business valued on growth rather than assets. If the valuation multiple compresses, as growth multiples do when rates rise or growth slows, the enterprise value can fall 10% with no change in EBITDA at all, and the equity takes a third of that on the chin. Say the assumption you leaned on: net debt stays fixed, which holds over a short window but not if the company is burning or generating cash. The question tests whether you can see leverage as a magnifier before you build a single model.

    Where candidates lose it

    The common loss is answering 10%, as if equity and enterprise value moved together. The debt sits between them and does not move, so the equity absorbs the whole fall.

    The second loss is giving 33% and stopping. The interviewer asked what 7x tells you about sensitivity, so name the multiplier, 10 over 3, and say that it works both ways.

    What the interviewer asks next

    • EBITDA falls 10% and the multiple stays at 10x. What happens to the equity, and is it the same answer?
    • At what fall in enterprise value is the equity worth nothing?
    • How does this magnifier relate to the beta of a levered company?

    Asked at Moelis & Company, Generalist, New York, 2026 (Wall Street Oasis): A tech company has leverage rate of 7X. What does it tell you about the about the impact on sensitivity?