How to value an enterprise

Enterprise value (EV) is defined as the total value of all the capital that is infused into a company, whether by way of debt or equity. It is calculated by taking the sum of the market value of equity (market capitalisation) and the book value of debt and subtracting the amount of cash available. Enterprise value is a useful metric for estimating the value of money required by an external investor to take over a company. The reason why cash is subtracted while calculating enterprise value is that such an external investor would have access to the cash of the company. If on

This article was originally published on March 24, 2022.