Enterprise Value (EV): Definition and Formula
Enterprise value is the total value of a company including debt and excluding cash. It is used in enterprise-value-based multiples such as EV/EBITDA.
Formula
EV = MarketCap + TotalDebt
−
Cash + MinorityInterest + PreferredStock
Where MarketCap is share price times shares outstanding. See Market Cap for more on share-count adjustments.
Notes
- EV is used with operating metrics (e.g., EV/EBITDA, EV/FCF) to compare firms regardless of leverage.
- Confirm whether datasets use basic, diluted or float-adjusted shares when computing market cap.
- Adjust for non-operating assets or liabilities to get an apples-to-apples comparison across peers.
Why Enterprise Value matters
Enterprise Value provides a comprehensive measure of company value that is independent of capital structure. It's essential for comparing companies with different debt levels and is the foundation for many valuation multiples.