What Is Enterprise Value (EV)?
Enterprise Value (EV) is a financial metric used to assess the total value of a company. It represents the theoretical takeover price of a company, and it includes both the market capitalization of the company and the company’s debt. EV is used by investors and analysts to compare companies with different capital structures and to determine whether a company is undervalued or overvalued. It provides a more comprehensive view of a company’s total value compared to just looking at its market capitalization.
Geeky Takeaways:
- EV provides a comprehensive view of a company’s total value by considering not only its market capitalization but also its debt, minority interest, preference shares, and cash reserves.
- EV enables investors and analysts to compare companies with different capital structures.
Table of Content
- Components of Enterprise Value
- Enterprise Value Formula
- Example of Enterprise Value
- What Does Enterprise Value Tell You?
- Enterprise Value as a Valuation Multiple
- Enterprise Value vs. Market Cap
- Enterprise Value vs. P/E Ratio
- Benefits of Enterprise Value
- Limitations of Enterprise Value
- Enterprise Value – FAQs
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