What is Enterprise Value?
A company's total value including debt and net of cash.
Formal Definition
Enterprise value (EV) equals market capitalization plus total debt minus cash and equivalents. It represents the theoretical takeover price of a business, capturing what an acquirer would pay to own operations free of the existing capital structure. EV is the numerator in multiples like EV/EBITDA, preferred for comparing firms with different debt levels.
In Simple Terms
It is the true cost to buy a whole company, not just its stock, because you also take on its debt but get to keep its cash. It gives a fuller price tag than market cap alone.
Example
A firm with a $50 billion market cap, $10 billion of debt, and $4 billion of cash has an enterprise value of $56 billion.