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EVFundamentals·10 min·10 checks

Enterprise value and equity value

Two different questions, and the bridge between them.

  • Finance
  • Financial analysis
  • Investing course
  • Financial markets
  • Certification

Almost every valuation error that survives to a final answer starts here. Enterprise value is what the operating business is worth, regardless of who financed it. Equity value is what the shareholders' claim on that business is worth after everyone else has been paid. They are not interchangeable, they respond differently to the same event, and every multiple you will ever use must have a numerator and a denominator drawn from the same side of the bridge. Get this wrong and a comparable companies analysis produces numbers that look reasonable and are meaningless.

Take the courseFree. One attempt per check, saved as you answer.

What this course covers

  1. 01Start from fully diluted market capitalisation
  2. 02Add net debt
  3. 03Add other claims ranking ahead of common equity
  4. 04Subtract what does not produce the earnings
  5. 05Match numerator to denominator

What you will be able to do

  • Any time you compute or interpret a multiple
  • Comparing companies with different capital structures
  • Bridging from a DCF (which produces enterprise value) to a share price
  • Reading a transaction press release, where "deal value" may mean either
  • Sanity-checking whether a number you have been handed is EV or equity

Where it does not apply

  • There is no situation where this can be skipped: it is the grammar of valuation, not a technique
  • The only trap is assuming a source has used your definition; check what is in their net debt

Predict it first

Not marked

Danubia Consumer Brands Plc borrows $200m and buys the freehold of the plant it has been leasing. Take the operating forecast as unchanged: same revenue, same margins, same cash flows.

ChangeNet debt: $620m → $820m

What happens to enterprise value?
Commit to an answer before the model runs.

How this prepares you for the assessment

This is one of 17 courses, and none of them is required for the Verified Valuation Assessment. The credential is earned on two timed drills, graded by the same engine that checks this course, and the drill score decides what it says you are capable of, from Foundation through to Distinction.

  • Distinction90%+Works independently across all three core methods.
  • Merit75%+Builds the core models with limited supervision.
  • Pass60%+Understands the mechanics; works through a model with guidance.
  • FoundationcompletedKnows the vocabulary and the shape of each model.