Enterprise Value (EV) Formula & example

Enterprise Value

Enterprise value is the theoretical value of any company on which it will be sold. And to calculate the total enterprise value there we needed to find out some of the financial information about the company. Stock value, it is the most required thing to calculate the gross value or Enterprise value. Total number of stocks is needed to calculate and they will also be added in enterprise value evaluation.

enterprise value

Debts on the company will also be calculated and will also be transferred to the new owner and also will be an integral part of the Enterprise Value Evaluation. Cash and cash equivalent will be on line for value calculation. And will also be transferred at the time of valuation.

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Enterprise value formula:

Enterprise value = Stock prices × Number of Stocks + Debt – Cash & cash equivalents

Enterprise value example:

Suppose a company ABC and having a total number of 50 stocks and each stock values of $100. And there is 5000$ debt on that ABC company.

But having cash & cash equivalents of total value $1500. Now we will calculate enterprise value with the help of above given data with Enterprise value formula.

EV = $100 × 50 + $5000 – $1500

      = 10,000$ – 1500$

      = 8500$

This 8500$ is the enterprise value of ABC company.

Enterprise value is helpful to calculate any company take over value.

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Harish is the editor at howto Finance. Here we publish high quality trending news topics on Business, Finance, Loans and Credit-Cards etc. Our editorial includes worldwide topics.

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