1. What Is Enterprise Value?

Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to market capitalization. It represents the theoretical takeover price needed to acquire a company.

2. How EV Is Calculated

The standard formula for Enterprise Value is:

Where:

• Market Cap — Current market value of equity
• Debt — Total debt including short-term and long-term
• Cash — Cash and cash equivalents
• Minority Interest — Portion of subsidiaries not owned
• Preferred Stock — Value of preferred shares

3. Importance of Enterprise Value

Details: EV provides a more complete picture of a company's valuation than market cap alone, as it considers debt and cash positions. It's widely used in valuation multiples like EV/EBITDA.

4. Using the Calculator

Tips: Enter all values in USD. Market cap, debt and cash are required fields. Minority interest and preferred stock default to zero if left blank.

5. Frequently Asked Questions (FAQ)

Q1: Why subtract cash in EV calculation?
A: Cash can be used to pay down debt after acquisition, effectively reducing the purchase price.

Q2: How does EV differ from equity value?
A: Equity value (market cap) only represents shareholders' claims, while EV represents claims of all investors (debt and equity).

Q3: When is EV most useful?
A: Particularly valuable when comparing companies with different capital structures or assessing acquisition targets.

Q4: What's included in "debt" for EV?
A: All interest-bearing liabilities including bank loans, bonds, capital leases, etc.

Q5: Why add minority interest?
A: Minority interest represents the value of subsidiaries not fully owned but consolidated in financials.