Enterprise Value (EV)

Enterprise Value of a firm is calculated as:

$$EV=\text{Market Capitalization}+\text{Total Debt}-\text{Cash and Cash Equivalents}$$

Where:

• Market Capitalization = Share Price × Number of Outstanding Shares
• Total Debt = Short-term Debt + Long-term Debt
• Cash and Cash Equivalents = Cash + Marketable Securities

It represents the total value of a company, including both equity and debt, minus cash. It is often used in valuation metrics such as EV/EBITDA to assess a company’s overall financial health and compare it with others in the industry.

Conversion for Equity Value

This means, with a bit of algebra, we can compute $V_{Equity}$ as

$$V_{Equity}=EV-\text{Total Debt}+\text{Cash and Cash Equivalents}$$