What is the Difference Between Enterprise Value and Equity Value?
One of the most exciting components of running a business is watching your enterprise consistently increase in value over time. Eventually, you might find yourself wondering: just how much is my business worth? As you might expect, there are actually many different ways you can potentially value of your business. Two of the most common types of business valuations are enterprise value and equity value. Each of these valuations has various uses and can be used in different situations. What is Enterprise Value? Usually, a business’s enterprise value will me notably higher than its equity. This is because enterprise value accounts for additional sources of capital (wealth) beyond just equity. To calculate enterprise value, you will simply add the market cap to all debts currently that are currently held by the enterprise. There are many different sources of debt that may be used during this calculation, including interest owed, preferred shares, and other debts that are in