Investing term

What is Enterprise value (EV)?

Market cap + total debt − cash. The 'takeover price' of the whole business, regardless of how it's financed.

Enterprise value (EV) is what it would cost to buy an entire business: its market cap plus total debt, minus cash on hand. It values the whole company regardless of how it's financed, which makes it fairer than market cap alone for comparing firms with different debt loads. It's the numerator in capital-structure-neutral multiples like EV/EBITDA.

For example

A company with a $1B market cap, $300M of debt, and $100M of cash has an enterprise value of $1.2B — the true takeover price.

Enterprise value (EV) is taught hands-on in Stage 15 — Valuation for Investors.

See the lesson →

Related terms

Book valueTotal assets minus total liabilities — the accounting net worth of the business.DCF (discounted cash flow)Estimate intrinsic value by adding up the present value of every future cash flow the business produces.Discount rateThe annual rate used to translate future dollars back into today's dollars in a DCF.Dividend yieldAnnual dividend per share ÷ share price. The cash income the stock pays out as a percentage of price.
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