Definition – What is Enterprise Value?
Enterprise Value is the value of the entire organization. It is a theoretical takeover price of the company.
Formula – How to calculate Enterprise Value
Enterprise Value = Value of Common Stock + Value of Preferred Stock + Market Value of Debt + Minority Interest – Cash and Investments
A company has common stock value of $7,000, preferred stock value of $3,000, debt value of $5,000, minority interest of $1,000, and cash and investments of $500.
Enterprise Value = $7,000 + $3,000 + $5,000 + $1,000 – $500 = $15,500
Therefore, this company has an enterprise value of $15,500.
Sources and more resources
- Wikipedia – Enterprise Value – Wikipedia’s entry on enterprise value. Includes the formula and examples of how it is calculated.
- Motley Fool – What Is Enterprise Value and Why Is It Important? – An introduction to the concept of enterprise value.
- The Balance –How to Calculate the Enterprise Value of a Company – Another introduction to the concept of enterprise value.
- Investopedia – Enterprise Value – An encyclopaedic entry on enterprise value.