Enterprise value represents the value of the firm to all stakeholders.
The theoretical value of Enterprise Value is the total takeover value of the firm. And if that is the case, then all claims on cash flows need to be included.
We go the extra mile with our diligence to ensure all claims are captured in our Enterprise Value formula. For details on these adjustments and more see our Accounting Loopholes section.
Note that Enterprise Value is the denominator in our Free Cash Flow Yield calculation.
Enterprise Value Formula:
+ Adjusted total debt (including off-balance sheet debt)
- Excess cash
- Unconsolidated Subsidiary Assets
- Net Assets from Discontinued operations
+ Value of Outstanding Employee stock option liabilities
+ Under (Over) funded Pensions
+ Preferred stock
+ Minority interests
- Net deferred compensation assets
- Net deferred tax assets
= Enterprise Value
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