Question 1

What is Enterprise Value (EV)?

Accepted Answer

Enterprise Value = Market Cap + Total Debt - Cash & Equivalents. It represents the total cost to acquire a company and is more comprehensive than market cap alone.

Question 2

What's the difference between EV and Market Cap?

Accepted Answer

Market cap only reflects equity value. EV also accounts for debt and cash. Companies with high debt have EV significantly higher than market cap; cash-rich companies have lower EV.

Question 3

What is EV/EBITDA?

Accepted Answer

EV/EBITDA is a common valuation multiple, measuring enterprise value relative to earnings before interest, taxes, depreciation and amortization. Lower ratios generally indicate cheaper valuation.

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