Work out what a whole business is worth to all its capital providers. Enter market cap (or share price and shares), debt, preferred stock, minority interest and cash to get enterprise value, then add EBITDA and revenue for EV/EBITDA, EV/EBIT and EV/Sales multiples.
Last updated:
Equity value from
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Balance sheet
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Short-term + long-term borrowings (and lease liabilities if you include them).
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Include short-term investments that could repay debt.
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Operating figures for multiples (optional)
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$
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Peer or deal multiple for an implied value.
Enter your values to see the result.
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How to use the Enterprise Value Calculator
Enter the equity value: market capitalization, or the share price and diluted shares outstanding.
Add balance-sheet items from the latest report: total debt, cash and equivalents, preferred stock and non-controlling (minority) interest. Leave any that don't apply at 0.
Enter EBITDA, revenue and EBIT (optional, usually trailing 12 months) to get valuation multiples.
Set a target EV/EBITDA (optional), such as a peer average, to see the implied equity value and share price.
Press Calculate EV and review the results, the bridge chart and the multiples table.
Enterprise value formula
EV = market capitalization + total debt + preferred stock + minority interest − cash and cash equivalents
Component
Effect
Why
Market capitalization
+
Value of all common shares (price × diluted shares)
Total debt
+
A buyer takes on, or must repay, the company's borrowings
Preferred stock
+
A claim ranking ahead of common shareholders
Minority (non-controlling) interest
+
Consolidated EBITDA includes 100% of partly owned subsidiaries, so their outside owners' share is added
Cash and equivalents
−
Cash comes with the company and offsets the purchase cost
Worked example: market cap $20.0B + debt $6.0B + preferred $0.5B + minority interest $0.3B − cash $2.5B = EV $24.3B.
With EBITDA of $2.4B, EV/EBITDA = 24.3 ÷ 2.4 = 10.1×; with revenue of $12B, EV/Sales = 2.0×.
Common EV multiples
EV/EBITDA = EV ÷ earnings before interest, taxes, depreciation and amortization. The most widely used acquisition multiple.
EV/EBIT = EV ÷ operating income. Penalizes capital-heavy businesses whose depreciation is a real cost.
EV/Sales = EV ÷ revenue. Useful for unprofitable or early-stage companies; the debt-adjusted version of price-to-sales.
Going the other way, implied equity value = target multiple × EBITDA − debt − preferred − minority interest + cash, and dividing by diluted shares gives an implied share price.
Tips for an accurate EV
Use diluted shares, including in-the-money options and convertible securities, for market cap.
Take balance-sheet items from the same date, ideally the latest quarterly report.
Match the numerator and denominator. If you add lease liabilities to debt, use EBITDA before lease costs.
Use trailing 12-month EBITDA for historical multiples or next year's estimate for forward multiples, but don't mix them across peers.
Frequently asked questions
What is the enterprise value formula?
Enterprise value = market capitalization + total debt + preferred stock + minority (non-controlling) interest − cash and cash equivalents. For example, $20B market cap + $6B debt + $0.5B preferred + $0.3B minority interest − $2.5B cash = $24.3B EV.
Why is cash subtracted from enterprise value?
A buyer of the whole company gets its cash, which could immediately pay down debt or be returned to the buyer, so cash reduces the net cost of the acquisition. Some analysts subtract only excess cash and keep the cash needed to run the business in EV.
What is the difference between enterprise value and market cap?
Market cap is the value of the common shares only. Enterprise value is the value of the entire operating business to all capital providers: shareholders, lenders, preferred holders and minority owners, net of cash. Two companies with the same market cap can have very different EVs if one carries heavy debt.
What is a good EV/EBITDA multiple?
It varies by industry and interest rates. Many mature businesses trade somewhere around 6× to 12× EBITDA, while fast-growing or high-quality companies can trade far higher, and cyclical or declining businesses lower. Compare a company with close peers and recent transactions rather than a fixed rule.
Can enterprise value be negative?
Yes. If a company holds more cash than the combined value of its shares, debt, preferred stock and minority interest, EV is negative. It is rare and usually seen in small companies the market believes will burn through their cash.
Why use EV multiples instead of P/E?
EV/EBITDA and EV/EBIT compare the value of the whole business with earnings available to all capital providers, before interest. That makes companies with different amounts of debt comparable, which P/E (affected by interest costs and leverage) does not.
Should leases and pensions be included in debt?
Under current accounting rules most leases appear on the balance sheet as lease liabilities. If you include them in debt, use EBITDA that excludes rent (as reported under IFRS 16 / ASC 842) so the numerator and denominator match. Unfunded pension obligations are sometimes added too; just be consistent across the companies you compare.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.