Enterprise Value

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Enterprise Value

The market capitalization of a firm's equity plus the market value of the firm's debt. Often the value of assets that are non-core are excluded from the final calculation.

Enterprise Value

The market value of a company if it were (hypothetically) to be taken over. It is calculated by adding its market capitalization to its debt, minority interest, and preferred equity at market value, then subtracting its cash or cash equivalents. This is an important aspect of business valuation and accounting.

Enterprise value.

A company's enterprise value is its worth as a functioning entity, or its acquisition cost.

You calculate enterprise value by adding a company's total long- and short-term debt to its market capitalization and subtracting its liquid assets, including cash, cash equivalents, and investments. In some formulas, preferred stock and minority interest in the company are included as debt while current accounts receivable and inventory are included as cash.

>From an investor's perspective, considering enterprise value as well as market cap and the customary ratios, such as price/earnings ratio (P/E) and earnings per share, can provide greater insight into the company's potential long-term worth.

>From a buyer's perspective, the more debt and the less cash a company has, the more expensive owning it will be, since the debts must be paid off and there's little cash to offset the interest. This reduces the price the acquirer is willing to pay.

References in periodicals archive ?
For multiples Berkery Noyes uses enterprise values (EV) that normalize values where less than 100% of a company is being acquired or has net debt.
We have managed transactions ranging from several million to more than four billion dollars in value, with an emphasis on mid market transactions of $10 million to $500 million in enterprise value.
The guidance stresses the importance of sound valuation methodologies and ongoing stress testing and monitoring of enterprise values.
Riverside specializes in premier companies with enterprise values of less than $100 million, and partners with strong management teams to build companies through acquisitions and value-added growth.
Both unsecured bondholders and secured lenders, including the whole of the second lien term loan, would likely share the values of assets not pledged in a forced liquidation or similarly agree to share the enterprise values of GP's businesses that own the assets.
Concentrating on companies whose enterprise values range from $10 million to $300 million, Headwaters MB will help its client companies execute mergers & acquisitions and raise equity and debt capital.
formed an alliance to promote key programs that advance free enterprise values among youth.
It focuses on companies with enterprise values ranging from Euro 15 million to Euro 400 million, investing a minimum of Euro 5 million in any one transaction.

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