How to use the enterprise value calculator
All company totals are in millions of dollars, taken from the most recent balance sheet.
- Share price and diluted shares outstanding. Together they give the market capitalization. The diluted count is on the income statement next to diluted EPS.
- Total debt. Add short-term borrowings, the current portion of long-term debt and long-term debt. Many analysts include lease liabilities as well; whichever you choose, be consistent when comparing companies.
- Preferred equity and minority interest. Both are claims that rank alongside or ahead of common shareholders. Minority interest (non-controlling interest) sits in the equity section.
- Cash and equivalents, including short-term investments that could be sold quickly.
The chart shows the bridge from market cap to enterprise value, and the table places the company in its size class.
The formulas
Enterprise value = Market cap + Total debt + Preferred equity + Minority interest − Cash
Net debt = Total debt − CashUse balance sheet figures from the same date. Net debt is negative when the company holds more cash than debt.
Minority interest is added for a reason that is easy to miss. When a company owns, say, 80% of a subsidiary, its income statement includes 100% of that subsidiary’s sales and EBITDA. Adding the outside owners’ stake keeps enterprise value consistent with those consolidated earnings.
A worked example
Company A trades at $48 with 250 million diluted shares, so its market cap is $12.00B (size class: Large cap).
It owes $3,500M of debt, has $200M of preferred equity and $150M of minority interest, and holds $1,850M of cash. Net debt is $1.65B.
Enterprise value = $12.00B + $3,500M + $200M + $150M − $1,850M = $14.00B, or $56.00 per share. EV is 1.17× the market cap.
Same market cap, different price tag
Two companies can have identical market caps and very different enterprise values. Keeping Company A’s share price and share count:
| Balance sheet | Market cap | Net debt | Enterprise value |
|---|---|---|---|
| Net cash ($500M debt, $2,500M cash) | $12.00B | -$2.00B | $10.00B |
| The example | $12.00B | $1.65B | $14.00B |
| Heavy debt ($9,000M debt) | $12.00B | $7.15B | $19.50B |
A buyer pays $10.00B for the cash-rich version and $19.50B for the indebted one, even though the shares cost the same. That is why multiples based on enterprise value, such as EV/EBITDA, compare companies with different amounts of debt more fairly than the P/E ratio, which looks at the shares alone.
Market cap size classes
Size classes are shorthand for risk and liquidity. Smaller companies tend to be more volatile, less widely followed by analysts and more expensive to trade. The thresholds in the table under the calculator are a common US convention, not a rule: some index providers draw the large-cap line lower, some brokers put small caps below $250 million, and a few split off nano caps below about $50 million.
A company priced at $12 with 90 million shares has a market cap of $1.08B (size class: Small cap). Index providers also often use float-adjusted market cap, which counts only shares available to the public, so their figure can be lower than the one calculated here.
Limitations
- Book values for debt. The calculator uses debt as reported. When bonds trade well below face value, the market value of the debt is lower.
- Not all cash is spare. Some cash is needed to run the business, and cash held abroad may be taxed when brought home. Subtracting all of it can understate enterprise value.
- Other debt-like claims such as pension deficits and lease liabilities are left out unless you add them to debt.
- Prices move daily, while the balance sheet is a quarterly snapshot. Use the latest figures for both.