What is Enterprise Value?
A definition of Enterprise Value
“Enterprise value is a measure of a company’s total value, often used as an alternative to equity market capitalization. It includes market capitalization, debt, minority interest, and preferred shares, minus total cash and cash equivalents.”
Business Glossary > What is Enterprise Value?
Examples of Enterprise Value in a Sentence:
Enterprise value provides a holistic view of a company’s worth.
Investors consider enterprise value to evaluate acquisition targets.
Enterprise value is crucial for meaningful company comparisons.
Why is Enterprise Value Important in Business?
Enterprise value offers a comprehensive picture of a company’s worth, beyond just its market capitalization. This metric is vital for investors looking to evaluate potential acquisition targets, providing insights into the company’s financial health and investment potential.
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Associated Terms
Here are some associated business terms and synonyms for “Enterprise Value”:
- Firm Value
- Total Enterprise Value
- Aggregate Value
Example of Enterprise Value in Practice
Consider a company, ABC Corp, with a market capitalization of $500 million. It has $100 million in debt, cash and cash equivalents of $50 million, and no preferred shares. The enterprise value of ABC Corp would be calculated as $550 million.
Final Notes on Enterprise Value
When evaluating enterprise value, it’s crucial to consider all components of the metric for a well-rounded financial analysis of a company. This thorough understanding helps stakeholders assess acquisition opportunities and investment risks effectively.
This has been a definition of Enterprise Value meaning.
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