Question

What should be included in debt and equity evaluation of a company? We choose Wendy's Co...

What should be included in debt and equity evaluation of a company? We choose Wendy's Co to analyse, and have already used ratio to analyse financial statement, but I really don't know how to do debt and equity evaluation. Please help me, thanks so much.

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Answer #1

1. The debt of the company should be evaluated in the terms of the market price of the debt. If the debt is a bond issued to the public then the market price would be easily available on the Stock exchange on which the bond is listed. If NOT available in the public issue, the debt should be taken at the book value.

2. The evaluation of the equity can be taken at the market price of the shares multiplied outstanding shares by the efficient market hypothesis.

But a better approach to follow here would be to determine the intrinsic value of the equity by using the Dividend Cashflow Model (DCF) or Free Cashflow Model (FCF).  

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