enterprise value

Definition

Enterprise Value
Enterprise Value represents the total value of a company as an acquisition target, combining its market capitalization with total debt and subtracting cash and cash equivalents. This comprehensive metric reflects the cost to purchase the entire business, providing a clearer picture of a company’s worth than market capitalization alone. EV is particularly useful for comparing companies with different capital structures since it accounts for both equity and debt financing. Investors and analysts use EV to assess the true value of a firm in merger and acquisition scenarios, as well as to determine relative valuation across industries. By considering cash balances and debt levels, it offers a holistic view of financial strength and underlying business value.

See also