1. What is Enterprise Value?

Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to market capitalization. It includes market capitalization plus debt minus cash and cash equivalents, providing a more accurate picture of a company's valuation.

2. How Does the Calculator Work?

The calculator uses the Enterprise Value formula:

Where:

• \( \text{Market Cap} \) — Total market value of equity
• \( \text{Debt} \) — Total debt including short-term and long-term obligations
• \( \text{Cash} \) — Cash and cash equivalents

Explanation: The formula accounts for both equity and debt while adjusting for cash holdings, providing a more complete valuation metric.

3. Importance of Enterprise Value

Details: Enterprise Value is crucial for comparing companies with different capital structures, assessing acquisition costs, and evaluating investment opportunities. It's widely used in financial analysis, mergers and acquisitions, and valuation.

4. Using the Calculator

Tips: Enter market capitalization, total debt, and cash & equivalents in the same currency. All values must be non-negative. The calculator will compute the Enterprise Value.

5. Frequently Asked Questions (FAQ)

Q1: Why use Enterprise Value instead of Market Cap?
A: EV provides a more complete picture by including debt and cash, making it better for comparing companies with different capital structures.

Q2: What's included in "debt" for EV calculations?
A: All interest-bearing liabilities including short-term debt, long-term debt, capital leases, and sometimes preferred stock.

Q3: How does cash affect Enterprise Value?
A: Cash reduces EV because it could theoretically be used to pay down debt, making the acquisition cheaper.

Q4: Are there limitations to EV?
A: EV doesn't account for non-operating assets, and comparisons are only valid when using consistent definitions of debt and cash.

Q5: How is EV used in valuation multiples?
A: EV is commonly used in multiples like EV/EBITDA, EV/Revenue, and EV/FCF to compare companies' valuations.