Financial term · Reviewed August 17, 2026
Enterprise value
Enterprise value: A business value measure representing operating assets before allocating value between debt and equity. The EBITDA Multiple Valuation Calculator returns this figure from enterprise value = selected earnings metric × valuation multiple; equity value subtracts net debt. At that calculator’s documented worked-example inputs the estimated equity value is $2,050,000; holding every other input steady, moving EBITDA, SDE or earnings metric from $400,000 to $600,000 moves it from $1,550,000 to $2,550,000, a spread of $1,000,000.
Enterprise value prices the operating business before deciding who owns what. Equity value depends on how much debt sits in front of it. So two identical companies financed differently show completely different market caps. Strip the financing out and they are comparable again. That is the whole purpose, and it is why acquisition multiples are usually quoted against it.
| Term | Enterprise value |
|---|---|
| Category | Business Finance |
| How it is found | Enterprise value = selected earnings metric × valuation multiple; equity value subtracts net debt |
| Worked example | Estimated equity value: $2,050,000 |
| Computed by | EBITDA Multiple Valuation Calculator |
| Related terms | 8 defined in this glossary |
Before you rely on it
What to check
Cash and debt both have to be in there.
The common error
Where people go wrong with enterprise value
Comparing one company's enterprise value to another's equity value. They are different quantities, the mismatch is easy to make from a stock screener, and the conclusion drawn from it is meaningless.
Worked through
Enterprise value in plain numbers
A company has a market capitalization of $500 million, $150 million in debt and $50 million in cash. Enterprise value is $500M + $150M − $50M, or $600 million. That is roughly what it would cost to buy the whole business and pay off its debts, net of the cash you acquire. If its EBITDA is $75 million, the EV/EBITDA multiple is 8.0, and a competitor with the same market cap but no debt would have an enterprise value of $450 million if it held $50 million in cash, which would make it look cheaper on the same earnings. Debt and cash change the picture.
Easily confused
Enterprise value and its neighbours
Enterprise value is not market capitalization and not equity value. Market cap is the value of the shares. Enterprise value adds debt and subtracts cash, so it represents the operating business regardless of how it is financed; it is also different from book value and from purchase price in an actual deal, where fees, control premiums and other adjustments apply; some analysts also add preferred stock and minority interests, and subtract certain investments. Multiples such as EV/EBITDA are built on it because they let you compare companies with different debt levels.
In real decisions
Where enterprise value turns up
Analysts use it to value companies, compare peers and screen for cheap or expensive stocks. Bankers use it in mergers and acquisitions to set an offer. Private equity uses it to size a purchase and the debt to finance it; small business buyers translate it into a price for an owner's earnings; it supports multiples of revenue, EBITDA and free cash flow. It is the foundation for valuing the operations independent of capital structure.
Know the edges
Where enterprise value stops being reliable
The calculation depends on choices: which debt to include, how to treat leases, whether cash is truly excess. Market caps move daily, so the figure changes constantly. It is a snapshot, not a verdict of worth. Multiples vary by industry, growth and risk, so comparisons across sectors mislead, and use it with cash flow, growth and quality assessments, and treat any single multiple as a starting point.
Quick answers
What people ask about enterprise value
Why add debt and subtract cash? To find the price of the whole operating business. A buyer who acquires the company takes on its debt and gets its cash, so the net figure reflects what is paid for the operations.
Which multiples use enterprise value? EV to EBITDA, EV to revenue and EV to free cash flow are common. They compare firms with different financing, unlike price-to-earnings.
Put it to work
How enterprise value is calculated
At the EBITDA multiple valuation calculator’s worked-example inputs, estimated equity value is $2,050,000, estimated enterprise value is $2,500,000. Moving EBITDA, SDE or earnings metric from $400,000 to $600,000 moves that first figure from $1,550,000 to $2,550,000.
Open the EBITDA Multiple Valuation Calculator →
These are planning metrics, not audited accounting or a valuation opinion.
Related vocabulary
Terms used alongside this one
Keep reading
Nearby in the glossary
- ← Emergency fund
- Epoch day →
- All 174 defined termsThe complete Free Calculators Online financial glossary.