Enterprise value

What is Enterprise value?

Enterprise Value is a metric that is used to assess the total value of a company by factoring in debt and cash. It is a less popular alternative to market capitalization, but it can give a more clear picture of a company’s true value.

Formula:

Price close * Common shares dil. + Pref. stock + Total debt + Accumulated minority interest + Cash & Short-term investments

What does Enterprise value mean?

It is believed that Enterprise value can be used to calculate how much a company will cost if it is bought out by another company. It is different from market cap because it factors in other variables like debt and cash.