GlossaryIntermediate
Enterprise Value (EV)
A company's total value including debt -- market capitalization plus debt, minus cash -- used as the basis for several other valuation ratios.
Enterprise Value (EV) represents a company's total value, including its capital structure: market capitalization plus total debt, minus cash and cash equivalents — reflecting what it would actually cost to acquire the entire company and pay off its debt, net of its cash on hand.
EV is the basis for several other valuation ratios, most notably EV/EBITDA (see Kaavon's "EV/EBITDA" glossary definition), since it provides a capital-structure-neutral way to compare companies with different levels of debt. See Kaavon's dedicated Enterprise Value article for the full calculation.
Examples
- Two companies with identical market capitalizations can have very different Enterprise Values if one carries significantly more debt than the other.
- Enterprise Value is the standard starting point for several other ratios, including EV/EBITDA and EV/Sales.