Assuming a company has no other funding sources other than debt and common equity, what is the difference between enterprise value and equity value?
All interest bearing debt less cash and equivalents
All interest bearing debt
Long term debt
Cash
Answers
Answer:
Enterprise Value (EV) is the measure of a company's total value. It looks at the entire market value rather than just the equity value. To calculate equity value follow this guide from CFI., so all ownership interests and asset claims from both debt and equity are included.
Answer:
Enterprise Value (EV) is the measure of a company’s total value. It looks at the entire market value rather than just the equity value, so all ownership interests and asset claims from both debt and equity are included. EV can be thought of as the effective cost of buying a company or the theoretical price of a target company (before a takeover premium is considered).
The simple formula for enterprise value is:
EV = Market Capitalization + Market Value of Debt – Cash and Equivalents
The extended formula is:
EV = Common Shares + Preferred Shares + Market Value of Debt + Minority Interest – Cash and Equivalents
Explanation:
Enterprise value and equity value are two common ways that a business may be valued in a merger or acquisition. Both may be used in the valuation or sale of a business, but each offers a slightly different view. While enterprise value gives an accurate calculation of the overall current value of a business, similar to a balance sheet, equity value offers a snapshot of both current and potential future value.
In most cases, a stock market investor, or someone who is interested in buying a controlling interest in a company, will rely on enterprise value for a fast and easy way to estimate the value. Equity value, on the other hand, is commonly used by owners and current shareholders to help shape future decisions.