If you paid $52 billion for Disney, you would actually end up with a total bill of $63 billion, because the company comes with a lot of debt. The enterprise value reminds all investors, large and small, that debt is a cost to the business.So lots of debt makes the Enterprise value higher? Isn't it more like Enterprise Cost?
Hi Pondee,Enterprise value is a way of looking at what the total value of the company would be to you if you were to acquire it today. The market cap represents the current value of the equity, but if you acquired the company you'd also receive the cash on its books and take on the debt as well. So enterprise value = market cap + debt - cash. Best,Nate
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