Enterprise Value (EV) is essentially what it would cost you to own an existing company. It is the company’s takeover value. The equations is as follows:

EV = Market value of common stock + the company’s debt + minority interest + preferred shares - the company’s cash

Simply think if you were to try to buy the company. You would need to buy the stock of the company, pay off the company’s debt, and you would acquire the company’s cash by owning it. ENTERPRISE VALUE is an excellent measure of a company’s true value.