How to Calculate Enterprise Value
What is Enterprise Value?
Enterprise Value (EV) = market cap + debt - cash. Allows comparing companies with different capital structures.
Step-by-Step Guide
- 1Input market cap, total debt, cash/equivalents
- 2Calculate EV
- 3Use for EV/EBITDA, EV/revenue valuation multiples
Worked Examples
Input
Market cap $500M, debt $200M, cash $50M
Result
EV = $500M + $200M - $50M = $650M
Shows true enterprise value
Common Mistakes to Avoid
- ✕Using market cap alone (ignores leverage)
- ✕Neglecting preferred stock, options
Frequently Asked Questions
Why subtract cash?
Acquirer would inherit cash; net cost to acquire is lower.
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