INTERESTINGFACTS

EV differs significantlyfrom simple marketcapitalization inseveral ways, andmany consider it tobe a more accuraterepresentation of afirm's value.

Enterprise value canbe thought of as thetheoretical takeoverprice if the companywere to be sold.

ENTERPRISE EQUITY ANDVALUE

The value of a firm is a reflection ofits operating, financing, and investingdecisions.In terms of private investing,

valuation is an integral part in thefield of finance and has significancein different areas such as merger andacquisitions, corporate finance, andfinancial reporting.

When a valuation analyst values acompany, the terms equity value andenterprise value are first to come inmind, where equity value is themarket capitalization of thecompany — i.e. the portion availableto its shareholders — and enterprisevalue is a measure of company’s totalvalue that is attributable to all itsinvestors.

In other words, equity value is thenumber which public at large seeswhile enterprise value represents itstrue value.

Equity value tells you at a glancehow much a company is worth,

whereas enterprise value tellsyou more accurately how muchit would really cost to acquire thecompany.

When you buy a house, there areall sorts of hidden costs likerequired repairs, unpaid bills,obligations, and more, but youmight also benefit, for example,

from getting furniture for freewith the house.

Enterprise value works the sameway; it takes into account theobligations that you need torepay, like debt, and also the“free gifts” you get, like cash, andgives you the true cost to acquirea company.

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WHAT IS YOUR COMPANYWORTH?

WITH JOHN M. FIFE