Enterprise Value

Business, Legal & Accounting Glossary

Definition: Enterprise Value

Full Definition of Enterprise Value

Enterprise Value (EV), also called Total Enterprise Value (TEV), is used as a more accurate alternative to market capitalization. It represents the entire cost of a company if someone were to acquire it. Enterprise Value includes a number of important factors such as preferred stock, debt, and cash reserves that are excluded from simple market capitalization.

The formula for Enterprise Value adds a corporation’s market capitalization, preferred stock, and outstanding debt together and then subtracts out the cash and cash equivalents found on the balance sheet.

Many analysts look for companies that are generating a lot of cash flow in relation to Enterprise Value.  Businesses with high cash flow relative to Enterprise Value usually don’t require much additional reinvestment. Instead, the owners can take the profit out of the business and spend it or put it into other investments.

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Enterprise Value. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 22, 2021 https://payrollheaven.com/define/enterprise-value/.
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Enterprise Value. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/enterprise-value/ (accessed: September 22, 2021).
American Psychological Association (APA):
Enterprise Value. PayrollHeaven.com. Retrieved September 22, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/enterprise-value/

Definition Sources

Definitions for Enterprise Value are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 22nd March, 2020 | 0 Views.