The Theory: In theory, what could be more logical than that the market value of a company (its stock price times the number of shares outstanding) should equal the Enterprise Value (the present value of the cash inside the company)?
The Reality: The reality is that the stock price and Enterprise Value are almost never equal. The 2nd Most Powerful Formula in Finance explains who creates and how value is created for Shareowners. In the process it provides individual investors with insight needed to earn their benchmark return (e.g. inflation plus 8% p.a.).
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