Why subtract cash from enterprise value?

Cash is not an operating asset. An acquirer receives it and could immediately use it to pay down debt. EV represents the cost to acquire the operating business.

What is included in total debt for EV?

Short-term and long-term debt, capitalized lease obligations, preferred stock if treated as debt, and minority interest. Operating liabilities like accounts payable are not included.

Is EV or market cap better for valuation?

EV is capital-structure-neutral, making it better for comparing companies with different leverage. EV/EBITDA and EV/Sales multiples are widely used in M&A. P/E is better for equity investor comparisons.

Enterprise Value Calculator

Calculate enterprise value: EV = Market Cap + Total Debt - Cash and Equivalents. Represents total takeover value of a business independent of capital structure.

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Frequently Asked Questions

Why subtract cash from enterprise value?

What is included in total debt for EV?

Is EV or market cap better for valuation?