The total value of a business: equity value plus debt minus cash.
EV is the theoretical takeover price — you acquire the equity, inherit the debt, and pocket the cash. It’s the denominator that makes valuation multiples debt-neutral.
Formula: EV = Equity + Debt − Cash
Example: $5M equity + $1.2M debt − $0.6M cash = $5.6M EV.
FAQ
What is Enterprise Value in simple terms?
EV is the theoretical takeover price — you acquire the equity, inherit the debt, and pocket the cash. It’s the denominator that makes valuation multiples debt-neutral.
How is it calculated?
EV = Equity + Debt − Cash. Example: $5M equity + $1.2M debt − $0.6M cash = $5.6M EV.