1. What is Equity Valuation?

Equity valuation represents the value of a company's shares and is calculated by adjusting the enterprise value for debt and cash positions. It's a key metric in financial analysis, mergers and acquisitions, and investment decisions.

2. How Does the Calculator Work?

The calculator uses the fundamental equity value formula:

Where:

• Enterprise Value — Total value of the company including debt and equity
• Debt — Total liabilities and debt obligations
• Cash — Liquid assets available to the company

Explanation: The formula adjusts the enterprise value by subtracting what's owed to debt holders and adding back cash that could be used to pay down debt or distribute to shareholders.

3. Importance of Equity Valuation

Details: Equity valuation is crucial for investors assessing a company's worth, for M&A transactions, for setting IPO prices, and for executive compensation tied to share performance.

4. Using the Calculator

Tips: Enter all values in USD. Enterprise value should include market capitalization plus debt minus cash. Debt should include all interest-bearing liabilities. Cash includes cash equivalents.

5. Frequently Asked Questions (FAQ)

Q1: Why is equity value different from market capitalization?
A: Market cap only considers share price × shares outstanding, while equity value adjusts for debt and cash positions.

Q2: What's included in "debt" for this calculation?
A: All interest-bearing liabilities including bank loans, bonds, and other borrowings.

Q3: Does this work for private companies?
A: Yes, though enterprise value must be estimated since there's no market price.

Q4: How often should equity valuation be calculated?
A: For public companies, continuously as share prices change. For analysis, whenever evaluating the company.

Q5: What if a company has more cash than debt?
A: This results in equity value being higher than enterprise value, common in cash-rich companies.