Confused on definition of Equity Value and Enterprise Value?
Hi All,
So, a guide I'm using offers two definitions of Equity Value and Enterprise Value.
One definition is as follows:
Equity Value = Value to Equity Investors
Enterprise Value = Value to Equity Investors + Value to Debt Investors + Value to Preferred Investors (and possibly others)
I completely understand those definitions, and that's how I have always thought about it.
However, another definition it gives for each is:
Equity Value = Value of Core-Business Assets + Value of Non-Core-Business Assets
Enterprise Value = Value of Core-Business Assets
I have no clue how to interpret these definitions. I always viewed equity value as a subsection of enterprise value, but these definitions seem to imply that equity value should be higher? Very confused.
Thank you so much for any help.
Your enterprise value definition is wrong. It more closely resembles total invested capital.
This is straight from the BIWS guide. Is it wrong? They reference this definition a lot. I thought that this was a reputable guide, so if this is incorrect then I'm worried about the accuracy of the rest of the guide.
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