Enterprise Value, also known as EV, is the appraisal of an organization’s total value. The value is calculated by adding the market values of common stock, preferred equity, debt, and the minority interest. Once those values are summed, the cash and investments are subtracted to calculate the final value. This valuation is common because it incorporates a company’s debt and cash reserves, resulting in an accurate value.
When a company is sold, the new owner must pay the equity value and reimburse that company’s debts and the new owner keeps the cash reserves, which is why the debt and cash reserves are considered in an enterprise valuation. Analysts use enterprise valuation when they want to compare companies that are in the same industry for many valuation services.
- Attracting investors to expand a company
- Purchasing a public company
- Potentially selling a company
Scalar’s expertise in business valuation gives our clients assurance that appropriate methods are used to reach accurate, reliable estimates for the value of the company, as well as the value of its stock. Scalar’s assumptions, methods, and an opinion of value are documented in a comprehensive valuation report.