Enterprise value (EV)
Principles of Finance glossary · Financial Statements, Markets & Working Capital
Definition
Market capitalization plus debt minus cash; the value of the firm to all capital providers.
Enterprise value (EV) in plain English
Enterprise value (EV) answers 'what would it really cost to buy this whole business?' — not just its stock, but taking over its debts too. You start with market capitalization (the price of all its shares added up), ADD its debt (because a buyer inherits those loans), and SUBTRACT its cash (because that cash comes with the purchase and offsets the price). It's like buying a house: the true cost is the sticker price plus the mortgage you assume, minus any cash left in a drawer inside. EV matters because it values the company for EVERYONE who funded it — both shareholders and lenders — which makes it fairer for comparing firms.
Also called: EV
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