Enterprise Value Calculator
Calculate the total value of a company with our comprehensive EV calculator
Enterprise Value
Understanding Enterprise Value
Enterprise Value (EV) is a comprehensive measure of a company's total value, often used as a more complete alternative to market capitalization. It considers not only equity value but also debt, preferred stock, minority interest, and cash reserves.
Market Capitalization: The total market value of a company's outstanding shares.
Total Debt: All interest-bearing liabilities including short-term and long-term debt.
Preferred Stock: Equity securities that have priority over common stock in dividend payments.
Minority Interest: The portion of subsidiaries not owned by the parent company.
Cash & Equivalents: Liquid assets that can be immediately converted to cash.
Enterprise Value provides a more accurate picture of a company's true value because it includes debt obligations and subtracts cash reserves. This makes it particularly useful when comparing companies with different capital structures.
Frequently Asked Questions
What is Enterprise Value used for?
Enterprise Value is primarily used for valuation comparisons between companies. It's especially useful in mergers and acquisitions as it represents the theoretical takeover price of a company.
Why subtract cash from Enterprise Value?
Cash is subtracted because it can be used to pay off debt immediately after acquisition. Essentially, the acquiring company would receive this cash, reducing the effective purchase price.
How does Enterprise Value differ from Market Cap?
Market Cap only considers the equity value of a company. Enterprise Value includes debt, preferred stock, and minority interest while subtracting cash, providing a more comprehensive valuation metric.
Is a higher Enterprise Value better?
Not necessarily. A higher EV indicates a larger company, but valuation ratios like EV/EBITDA are better indicators of whether a company is overvalued or undervalued relative to its peers.