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Enterprise Value Formula:
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Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to market capitalization. It includes the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
The calculator uses the Enterprise Value formula:
Where:
Explanation: EV represents the theoretical takeover price needed to acquire a company, accounting for both equity and debt while subtracting cash that would reduce the net cost.
Details: Enterprise Value is important because it provides a more accurate valuation metric than market cap alone, especially when comparing companies with different capital structures. It's widely used in valuation multiples like EV/EBITDA.
Tips: Enter all values in USD. Market cap should be the current equity value, debt should include all interest-bearing obligations, and cash should include cash equivalents.
Q1: Why use EV instead of market cap?
A: EV provides a more complete picture by including debt and cash, making it better for comparing companies with different capital structures.
Q2: What's included in total debt?
A: All interest-bearing obligations including short-term debt, long-term debt, capital leases, and any other financial liabilities.
Q3: Does EV include minority interest?
A: The basic formula doesn't, but some variations add minority interest to the calculation for more precision.
Q4: How does EV differ from equity value?
A: Equity value is just the market cap representing shareholders' claim, while EV represents claims of all investors (debt and equity).
Q5: When is EV most useful?
A: Particularly useful in mergers and acquisitions, comparative valuation, and when analyzing companies with significant debt or cash positions.