Where Annex I requires you to use enterprise value, you must still follow the definition given: cash or cash equivalents should not be deducted from the calculation. The ESAs warn that if you go beyond that definition and use a broader “enterprise value” concept, you may end up with negative values, which are not allowed for these indicators. In short, stick to the Annex I definition so that the enterprise value in the denominator cannot be negative.
Calculation of Indicators 1 and 2 table 1 - Enterprise Value Question: For those indicators where Enterprise Value is used, how should we proceed if the Enterprise Value is negative?
The ESAs note that the widely used concept of “enterprise value”, outside the specific reference in Annex I can result in negative enterprise values. In such cases the cash held by the enterprise exceeds all other factors in the equation. However, the ESAs have specified in point 4 of Annex I of the Delegated Regulation that for the purpose of the calculation of certain indicators, “enterprise value” should be used but the definition specifies that cash or cash equivalents should not be deducted from the sum. Therefore, enterprise value calculated according to the definition laid down in Annex I cannot be negative.
European Supervisory Authorities (ESAs)
