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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
While both indexes since inception show relatively comparable growth in enterprise values, private equity owned companies traditionally have more leverage than public companies and generate relatively greater equity gains.
Middle market consumer businesses experienced declines in enterprise value (0.5%) in the second quarter.
Energy industry enterprise value remained relatively flat since the beginning of 2019, as the industry exhibited the lowest enterprise value growth of any of the tracked industry since 2014.
For information on the bankruptcy valuations and creditor recoveries in the prior bankruptcies please see Fitch Research on "Telecom, Media and Technology Bankruptcy Enterprise Values and Creditor Recoveries," dated August 2014, which is available on our website at www.fitchratings.com.
The ongoing secular decline of yellow pages publishing directories has been driving down the company's enterprise value in each successive bankruptcy reorganization plan.
Secured loan claims for various subsidiary credit facilities would recover between 73% and 82%, with a midpoint recovery of 78% based on the $1.55 billion enterprise value. Recovery would be in the form of a new term loan and new equity.
Comment: Deal sizes refer to enterprise values., Deal size of USD3.5m refers to Jacaranda Productions.
Communisis said that it bought Jacaranda for an enterprise value of some GBP1.5m (USD2.5m/EUR1.8m), on a cash- and debt-free basis, plus minimal surplus cash.
Communisis also took over Public Creative for an enterprise value, on a cash- and debt-free basis, of GBP350,000 in cash, plus surplus cash of GBP40,000, the company said.
Many leveraged transactions are underwritten with reliance on the imputed value of a business ("enterprise value"), which often exhibits a high degree of volatility.

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