Question

Holding everything constant enterprise value will increase if?

Answer 1

Answer: the expected growth rate increases for operating income.

Operating income indicates the main course of business.

Operating income = Gross profit – all sorts of operating expenses (like, legal fees, salaries, rent, depreciation, etc.)

There should not be any non-operating income like bank interest income.

If the expected growth of such income is high, the business is profitable in future. Investors get reliability to invest there and other stakeholders’ interests are also protected. The business earns reputation in the market and it increases enterprise value.