Enterprise Value (EV)
Enterprise value is the total value of a business — equity plus net debt.
EV = market cap + total debt − cash. It represents what you'd actually pay to acquire the whole business and take on its obligations. EV is used in valuation multiples like EV/EBITDA and EV/Sales that are more capital-structure neutral than price-based ratios.
EV/EBITDA is the standard takeover valuation multiple because it strips out differences in depreciation policy, tax rates and interest burdens, allowing comparison across companies with different debt levels.
A company with no debt and lots of cash has an EV below its market cap — a sign that the cash holding is a large proportion of the company's total value.
Example
A company with a £5bn market cap, £1bn debt and £500m cash has an EV of £5.5bn.
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