Negative Net income and positive Operating Cash Flow

Question

could someone explain how come a company has Enterprise an value number higher than their Market cap, when enterprise value equals market cap + net debt? I might be stubid but I do not understand how... also the same company is not profitable, has negative net income (for the last quarter and even the last five years) but has a positive "Total cash flows from operations" in the last quarter, how can that be? maybe there is something I am missing... just wonder if anyone knows if that is possible and how? thanks

D Stanley · Answer

Enterprise value is Market Cap + Total Debt - Cash, so if a company has no debt (or less debt than cash) then its Enterprise Value will be less than Market Cap.
Net Income includes several items that are not included in Operating Cash Flow, most notably Depreciation expense and interest expense. So if a company books large amount of depreciation (which is a non-cash expense) or interest expense (which is a financing cash flow, not operating), then it can have a negative Net Income even though their operations are bringing cash in the doors.

Negative Net income and positive Operating Cash Flow

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