In corporate valuation, the value of a company’s operations including debt and excluding excess cash is called enterprise value.
Enterprise value, commonly abbreviated EV, estimates what it would cost to acquire a company’s operating business while accounting for the claims of both shareholders and debt holders. A common simplified formula is market capitalization plus total debt and other debt-like claims, minus cash and cash equivalents.
That structure distinguishes EV from market capitalization. Market capitalization reflects only the market value of a company’s publicly traded equity. Enterprise value adds financing obligations and subtracts cash that could reduce the effective acquisition cost. Analysts therefore often compare EV with operating measures such as EBITDA or revenue.
The calculation can vary depending on the purpose and data available. Analysts may adjust for minority interests, preferred stock, leases, or non-operating investments. Enterprise value is not the same as book value, which is based primarily on accounting carrying amounts rather than current market valuations.