Enterprise Value (EV)
The true total price tag of acquiring a business
Definition
Enterprise Value (EV) is the total value of a company, calculated as market capitalization plus total debt minus cash and cash equivalents. EV represents the theoretical takeover price — the amount a buyer would need to pay to acquire the entire company including its debt. It is commonly used in ratio analysis as a denominator (EV/EBITDA, EV/Sales) because it provides a capital-structure-neutral measure of company value.
Formula / Rules
EV = Market Cap + Total Debt − Cash & Equivalents
Example
A company has a market cap of $500M, $100M in debt, and $50M in cash. Enterprise Value = $500M + $100M − $50M = $550M. If an acquirer buys the company at this EV, they get the $50M cash to offset part of the purchase, but also inherit the $100M debt obligation. EV/EBITDA of 8× is considered fair value in most industries.
Related Terms
Frequently Asked Question
What is Enterprise Value?
Enterprise Value is the total takeover cost of a company — market cap plus debt minus cash. It is more comprehensive than market cap alone and is used in EV/EBITDA and EV/Sales ratios.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.