This measure's the total value of a business by combining the market value of equity and net debt as an estimate of what a predator would pay for it.
Suppose a firm has issued 100,000 shares currently priced at £2.50, has borrowed £75,000 in short and long-term bank loans and has cash of £25,000. The enterprise value is the firm's market capitalisation of £250,000 (100,000 x £2.50) plus net debt of £50,000 (loans of £75,000 minus cash of £25,000), so £300,000 in total.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
'We face a £6m inheritance tax bill under Reeves's changes – it's sheer terror'Thousands of families fear they’ll have no option but to look at selling their firms in a fire sale to pay inheritance tax bills, due to Rachel Reeves’s changes to business property relief
-
Millions of over 50s fear pension investment risk – how should you position your portfolio?To de-risk or not to de-risk, that is the question. Act too late and you could face irreversible losses. Move too early and miss out on significant gains that could transform your retirement.
