What is it?
Enterprise value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company’s balance sheet. Enterprise value is calculated as market capitalization plus total debt minus cash.
Who is interested?
The financial community and investors.
What does it tell me?
Enterprise value is a popular metric used to value a company for a potential takeover because a potential acquirer would need to buy out equity holders and assume a company’s debt obligations but get to keep its cash.