Enterprise Value

Enterprise value means a company’s total value including equity, debt, and cash adjustments. In simple terms, enterprise value estimates what it would cost to buy the whole business. Enterprise value is important because it gives a broader view than market capitalization alone. It includes debt because a buyer would usually take on the company’s debt, and it subtracts cash because cash can reduce the net cost. For example, a company with a $100 billion market capitalization, $20 billion in debt, and $10 billion in cash may have an enterprise value of $110 billion. Enterprise value is not the same as market capitalization. Market capitalization looks only at equity value, while enterprise value considers debt and cash.