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Enterprise Value (EV)

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Enterprise Value (EV)

Enterprise Value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. It is a measure of a company’s value, including both its debt and equity. It is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EV is a measure of a company’s total value, including both its debt and equity. It is often used as a more comprehensive alternative to equity market capitalization.

History of Enterprise Value

The concept of Enterprise Value was first introduced in the 1980s by the financial consulting firm Stern Stewart & Co. as a way to measure the value of a company. Since then, it has become a widely accepted measure of a company’s total value. It is used by investors, analysts, and financial advisors to evaluate a company’s performance and potential. It is also used by companies to assess their own performance and potential.

Comparison of Enterprise Value to Other Measures

Measure Description
Market Capitalization The market value of a company’s outstanding shares.
Enterprise Value The market value of a company’s outstanding shares plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
Book Value The value of a company’s assets minus its liabilities.

Summary

Enterprise Value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. It is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EV is a useful measure for investors, analysts, and financial advisors to evaluate a company’s performance and potential. For more information about Enterprise Value, visit Investopedia, The Balance, and Seeking Alpha.

See Also

  • Market Capitalization
  • Book Value
  • Debt-to-Equity Ratio
  • Price-to-Earnings Ratio
  • Return on Equity
  • Return on Assets
  • Debt-to-Asset Ratio
  • Price-to-Book Ratio
  • Earnings Before Interest and Taxes (EBIT)
  • Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

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