Enterprise Value Calculator

Market Capitalization ($)

Total Debt ($)

Preferred Stock ($)

Minority Interest ($)

Cash and Cash Equivalents ($)

Calculation Results:

$0.00

function calculateEV() { var marketCap = parseFloat(document.getElementById('marketCap').value) || 0; var debt = parseFloat(document.getElementById('totalDebt').value) || 0; var preferred = parseFloat(document.getElementById('preferredStock').value) || 0; var minority = parseFloat(document.getElementById('minorityInterest').value) || 0; var cash = parseFloat(document.getElementById('cashEquivalents').value) || 0; var enterpriseValue = marketCap + debt + preferred + minority – cash; document.getElementById('evOutput').innerText = '$' + enterpriseValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); var breakdownText = "The Enterprise Value represents the theoretical takeover price: (Market Cap " + marketCap.toLocaleString() + " + Debt " + debt.toLocaleString() + " + Preferred " + preferred.toLocaleString() + " + Minority " + minority.toLocaleString() + ") minus Cash " + cash.toLocaleString() + "."; document.getElementById('evBreakdown').innerText = breakdownText; document.getElementById('evResultWrapper').style.display = 'block'; }

Understanding Enterprise Value (EV)

Enterprise Value (EV) is a comprehensive measure used to assess a company's total valuation. Often referred to as the "takeover price," EV provides a more accurate picture of a firm's value than market capitalization alone because it accounts for debt, cash, and other financial obligations an acquirer would have to assume or would receive.

The Enterprise Value Formula

To calculate the Enterprise Value of a business, we use the following standard formula:

        EV = Market Capitalization + Total Debt + Preferred Stock + Minority Interest – Cash and Cash Equivalents
    

Components Explained

Market Capitalization: The total value of all outstanding shares (Share Price × Number of Shares).
Total Debt: The sum of short-term and long-term liabilities. An acquirer must pay off this debt, effectively increasing the cost of the purchase.
Preferred Stock: These are hybrid securities that act more like debt than equity in a liquidation scenario, so they are added to the cost.
Minority Interest: The portion of a subsidiary that the parent company does not own but is consolidated into its financial statements.
Cash and Cash Equivalents: This is subtracted because an acquirer would "receive" this cash upon buying the company, effectively lowering the net cost.

Real-World Example

Imagine a company, TechFlow Inc., with the following financials:

Market Cap: $1,000,000
Total Debt: $250,000
Cash on Hand: $100,000
Preferred Stock: $0

While the Market Cap is $1M, the Enterprise Value would be:

$1,000,000 (Equity) + $250,000 (Debt) – $100,000 (Cash) = $1,150,000

In this case, an investor needs $1.15 million to actually "buy" the entire operation, not just the $1 million listed on the stock exchange.

Why EV is Better Than Market Cap

Market capitalization can be misleading. Two companies might both have a market cap of $1 billion. However, if Company A has no debt and $500 million in cash, its EV is $500 million. If Company B has $2 billion in debt and no cash, its EV is $3 billion. Company B is significantly "more expensive" to acquire and carries much higher financial risk, despite having the same market cap as Company A.

Analysts frequently use EV to calculate valuation multiples like EV/EBITDA or EV/Sales, which allow for a fair comparison between companies with different capital structures (varying levels of debt vs. equity).