What is Enterprise Value?
Enterprise Value (EV) is the total cost to acquire a business: what you would pay to buy all equity, assume all debt, and receive all cash on the balance sheet. It is capital-structure-neutral and therefore more comparable across companies with different leverage than market cap alone. EV is the foundation of most M&A and LBO analysis and is the numerator in multiples like EV/EBITDA and EV/Revenue. Market cap only captures the equity slice; EV captures the full business. Deducting cash reflects that a buyer acquires it immediately upon purchase, reducing the effective cost. Minority interest and preferred stock are added back as they represent claims on the business senior to common equity.
Formula
EV = Market Cap + Total Debt − Cash & Equivalents
Full form: EV = Market Cap + Debt + Preferred Stock + Minority Interest − Cash
Calculator
How to Use
- 1Calculate market cap: Current price × diluted shares outstanding.
- 2Add total debt: Short-term borrowings + current portion of long-term debt + long-term debt.
- 3Subtract cash: Cash and cash equivalents + short-term investments (liquid assets the acquirer would immediately receive).
- 4Add minority interest / preferred: If present on the balance sheet, add these, as they represent claims ahead of common equity.
Worked Example
Example: Mid-cap industrial
Market Cap
$8B
Total Debt
$2B
Cash
$500M
EV = $8B + $2B − $0.5B = $9.5B. The business costs $9.5B to acquire in full, even though the equity market cap is only $8B. The extra $1.5B reflects the net debt burden an acquirer must assume. Dividing by EBITDA of say $950M gives EV/EBITDA of 10×, a typical industrial valuation.
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Figures from the most recent annual filing (10-K / 20-F), sourced directly from SEC EDGAR.