Valuation Intermediate

Enterprise Value (EV)

A company's total value including debt and subtracting cash, used for comparing companies.

Definition

Enterprise value represents the total value of a company's business operations, independent of its capital structure. It is calculated as equity value (market cap) plus total debt, minus cash and equivalents. EV is commonly used in valuation multiples like EV/Revenue or EV/EBITDA because it allows apples-to-apples comparisons between companies with different amounts of debt and cash.

Why it matters

When you see valuation multiples quoted for comparable companies, they often use enterprise value. Understanding EV helps you gauge whether your company's valuation is reasonable relative to peers.

Example

A company has a $500M equity valuation, $20M in debt, and $50M cash. Enterprise value is $500M + $20M - $50M = $470M. With $100M in revenue, the EV/Revenue multiple is 4.7x.

Related terms

Valuation Multiple
A ratio (like revenue multiple) used to estimate a company's worth relative to a financial metric.
EBITDA
Earnings before interest, taxes, depreciation, and amortization; a proxy for operating profitability.
Post-Money Valuation
What a company is worth immediately after receiving new investment (pre-money + new capital).
Fully Diluted Valuation
Company value calculated using ALL shares, including unexercised options and unconverted instruments.
Initial Public Offering (IPO)
When a private company first sells shares to the public on a stock exchange.

More from Valuation

This definition is an educational summary. It is not legal, tax, or investment advice. Specific terms in your equity grant or company documents may differ.