Deflation:
A Persisting decline in prices results in a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans. Deflation is also linked with recessions and with the Great Depression.
What does the negative EV mean?
I asked this question to my friend who works at KPO, and this is what he had to say.
Let's say there's a company, BigB Inc., that has a market cap of $40B, $2B of debt, no preferred stock, and $45B of cash and cash equivalents, making BigB have a total enterprise value of -$3B.
Banks and Negative EV:
Further, their blog on negative EV cleared my doubts on why in the current markets cash in hand is considered to be a king. This company has more cash than the market value and if the forward EPS is attractive then many would suggest such companies to be a good buy. These companies are effectively offering profits to their shareholders for free. This is true in the case of many banks that have a lot of cash in their reserves.
The blog takes this notion of negative EV further, by highlighting the geographical distribution of the banks that have a negative EV.