Enterprise Value (EV)

Valuation & Fundamentals

Market capitalization plus the company's debt, minus its cash and cash equivalents; some calculations also add preferred stock and minority interests.

It approximates what a buyer would have to pay to acquire the whole business, debt included. That is why ratios that compare companies with different debt loads, such as EV/EBITDA, use it instead of market cap.

Example

01Market Cap$100 billion
02Add Debt+$30 billion
03Subtract Cash-$10 billion
04Enterprise Value$120 billion

A company with a market cap of $100 billion, $30 billion of debt and $10 billion of cash has an enterprise value of $120 billion.

Related Terms

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