Corporate FinanceFinancial Glossary
Enterprise Value
Definition
The total value of a company, calculated as Market Capitalization + Total Debt - Cash and Cash Equivalents. Unlike market cap, enterprise value accounts for a company's debt obligations and cash reserves, providing a more complete picture of what it would cost to acquire the entire business.
Why It Matters
Enterprise value is used in valuation ratios like EV/EBITDA and EV/Revenue, which are more reliable than price-based ratios for comparing companies with different capital structures. A company with high debt and low cash will have an EV much higher than its market cap.