How to calculate EV?

[jatin]

I'm learning about company valuation and came across the term "Enterprise Value (EV)." Can someone explain how to calculate it, what components are included (like debt or cash), and why it's used instead of just market capitalization?

 

[rajivkumar]

To calculate Enterprise Value (EV), you sum a company's market capitalization, total debt, and minority interest, then subtract its cash and cash equivalents. The formula is: EV = Market Capitalization + Total Debt - Cash and Cash Equivalents

 

[robertwilliam]

To calculate EV (Expected Value), multiply each possible outcome by its probability and sum the results:


EV = (Probability₁ × Value₁) + (Probability₂ × Value₂) + ... + (Probabilityₙ × Valueₙ)


It’s commonly used in statistics, finance, and decision-making to determine the average expected outcome over time.