Enterprise Value

Enterprise value estimates what it would cost to buy an entire business outright: its market capitalization plus total debt, minus the cash on hand. Unlike market cap, which prices only the equity, enterprise value reflects the debt a buyer would inherit and the cash they’d get to keep — so it allows fairer comparisons between companies with very different balance sheets. It’s the basis for ratios like EV/EBITDA that many analysts prefer to a simple P/E.