Enterprise value (EV) is one of the most important metrics for measuring a company’s total value. EV provides a comprehensive measurement that not only accounts for market capitalization but also includes debt, minority interest, preferred equity, and cash holdings.
In this guide, we will cover:
Enterprise Value (EV) is a measurement of a company’s total valuation. Unlike market capitalization, which focuses only on equity value, EV accounts for short‑term and long‑term debt, minority interests, and preferred equity.
The Enterprise Value (EV) Calculator is an online tool that is used to calculate enterprise value based on these key input fields:
5 million shares at $20 each price = $100 million)$20 million)$15 million)$5 million)$2 million)As soon as you fill in all fields, the calculator will instantly display the company’s enterprise value.
The logic behind the enterprise value calculation is straightforward. We subtract cash and equivalents from the sum of market capitalization, total debt, minority interest, and preferred equity. Here is the mathematically formula:
EV = marketCap + totalDebt + minorityInterest + preferredEquity - cashAndEquivalents
To clearly understand, let's walk through a real-world example.
Suppose you want to calculate the EV for a software company. Here is the company’s financial profile:
$250 million$80 million$20 million$8 million$5 millionLet's perform calculation:
EV = $250M + $80M + $8M + $5M − $20M = $323 million
This means someone would need to pay $323 million to buy 100% of the software company.
It can be difficult to determine market capitalization for private companies because their equity is not publicly traded. Instead, you would need an equity valuation, such as a recent financing round, as a substitute for market capitalization.