Enterprise Value

The true cost to buy a business.

Market cap prices the equity, but a buyer of the whole company also takes on its debt and gets its cash. Enterprise value adjusts for both, giving a truer price for the entire business. Enterprise value = Market cap + Total debt − Cash Market cap Rs 1,000 crore, debt Rs 200 crore, cash Rs 50 crore. EV = 1,000 + 200 − 50 = Rs 1,150 crore. EV is why two companies with the same market cap can be priced very differently once debt and cash are counted. Truer acquisition price Accounts for debt and cash Better for comparing capital structures More data needed Less intuitive than market cap Debt/cash figures can shift

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Valuation.