Total value of a company's operations, independent of capital structure.
enterprise_valueAlso: EVEnterprise Value represents the theoretical takeover price of a company - the total value a buyer would need to pay to acquire all economic interest in the business. It equals equity value plus debt minus cash, representing the value of the operating business independent of how it is financed.
EV is the preferred valuation metric for comparing companies across different capital structures. It represents what the "whole business" is worth to an acquirer who would assume the debt and receive the cash.
Market cap plus debt minus cash and equivalents.
= Market_Cap + Debt + Preferred + Minority_Interest - Cash - InvestmentsFull EV bridge with all capital structure items
= PV(FCF) + PV(Terminal_Value)Deriving EV from discounted cash flows
Use market values where available. Include all debt-like items (capital leases, pension obligations, etc.). Subtract excess cash and non-operating assets.
Think of EV as the "total price tag" to buy a company. You'd pay for the equity, assume the debt, but get the cash - so it's Equity + Debt - Cash.
The EV bridge has many components. Master the full bridge: market cap + debt + preferred + minority interest - cash - investments.
For complex situations, consider treatment of convertibles, in-the-money options, pension obligations, and operating vs finance leases.