Are there any problems with the Enterprise Value formula you just gave me?

Yes – it’s too simple. There are lots of other things you need to add into the formula with real companies:

• Net Operating Losses – Should be valued and arguably added in, similar to cash.

• Long-Term Investments – These should be counted, similar to cash.

• Equity Investments – Any investments in other companies should also be added in, similar to cash (though they might be discounted).

• Capital Leases – Like debt, these have interest payments – so they should be added in like debt.

• (Some) Operating Leases – Sometimes you need to convert operating leases to capital leases and add them as well.

 Unfunded Pension Obligations – Sometimes these are counted as debt as well.

So a more “correct” formula would be Enterprise Value = Equity Value – Cash + Debt + Preferred Stock + Noncontrolling Interest – NOLs – LT and Equity Investments + Capital Leases + Unfunded Pension Obligations…

In interviews, usually you can get away with saying “Enterprise Value = Equity Value – Cash + Debt + Preferred Stock + Noncontrolling Interest” 

I mention this here because in more advanced interviews you might get questions on this topic.