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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Enterprise Value - market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents - represents the economic value of a company - the minimum amount an acquirer would have to pay to take over the company.
Enterprise Value examples
Enterprise value differs from Market Cap in that market cap doesn't fully account for things like cash and debt. For example, a company with a market cap of $100 million and $10 million in cash would really only cost $90 million to acquire - because you could use the $10 million of the company's cash to pay the purchase price. Similarly, a company with a market cap of $100 million and $10 million in debt would really cost $110 million to acquire, because you would assume the company's debt when you acquire it.
Wikinvest Calculation
Enterprise Value is calculated as:
EV = Market Capitalization + Long Term Debt + Minority Interest + Preferred Stock - Cash And Cash Equivalents
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