Fundamental Glossary / Valuation Ratios
Enterprise Value (EV)
The value of the core operations: equity value plus net debt and other claims, minus cash that is truly surplus.
Formula
Market capitalization + debt + preferred stock + minority interest - cash and equivalents. Leases are often added as debt.
What it means
If you bought every share and also paid off the lenders, enterprise value is roughly the cheque for the operating business. Cash is subtracted because a buyer receives it.
EV is the numerator in EV/EBITDA, EV/EBIT, and EV/Sales because those denominators are claims of both shareholders and lenders.
How to read it
A company can have a modest market cap and a large enterprise value when debt is high. Comparing that firm with a debt-free peer on P/E alone flatters the leveraged one.
What to watch
Not all cash is surplus. Cash trapped in a regulated subsidiary, or cash needed as working capital, should not be subtracted in full. Also include earn-outs, pension deficits, and minority interests when they are real claims.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.