Enterprise Value vs. Equity Value | Understanding the Enterprise Value Formula

[@eric_andrews]

Questions? Let me know in the comments happy to discuss. 🚀 Also, if you want to learn how to systematically scale your startup without ending up as one of the 90% of startups that fail, have a look at this ⇒ www.ericandrewsstartups.com/financeforstartups

[@yourstruly5DA]

Brilliant and simple explanation. Good stuff, keep it up and publish more useful content. Most of the finance professionals I had seen, make things unnecessarily complex. You are are rare breed. I like all your videos.

[@eric_andrews]

Appreciate that, working on a new video right now! Lots more to come

[@DM-ge1je]

Equity value/EBITDA is not appropriate metric. We should use either EV/EBITDA or P/E (equity value/earnings)

[@eric_andrews]

Hi DM - why would you think that one specific valuation method is the best, and the others are wrong? Do you have examples supporting your viewpoint?

[@DM-ge1je]

@@eric_andrews ebitda is available to all investors rather than just equity holders. Enterprise value is also available to all stakeholders=> it makes makes sense to pair them together Equity value /ebitda is comparing apples to oranges. Equity value does not reflect the company’s entire capital structure - only part available to equity investors

[@saumyashah152]

Great content mate!

[@eric_andrews]

My pleasure

[@daaahjames6500]

These videos are great man!

[@muhammedjazmil5112]

Hey ... really loved your way of explanation its helped me in somehow

[@eric_andrews]

Hey muhammed - really great to hear that and glad you learned something new. Cheers!

[@jefffaulkner8793]

Why would a seller sell their cash? If it's a pass-through entity, the seller can likely take that cash out via retained earnings prior to sale. Are you assuming C-Corps?

[@valentonw772]

Beautifully simplified.

[@chrisbuckley3403]

Great vids. What is your formula for value businesses that are for sale?

[@majdsahmarany3091]

Thanks Eric!

[@eric_andrews]

👍👍👍😎

[@_tacotempura]

thanks for the explanation here!! the video I didn’t know I needed haha

[@eric_andrews]

Ha! Yes, I think this is actually a pretty important subject 😃 cheers michael

[@TheJaebeomPark]

Wow, Thank you for your explanation

[@eric_andrews]

Happy to help. Appreciate the comment!

[@x2x3456]

So commonly the buyer pays the equity value, and then assumes existing debt. Do buyers ever pay the equity value and the debt value aswlll?

[@sebholding]

What about the cash generated by negative working capital ? Logically it shouldn't be deducted from long term debt

[@diegocaicedo36]

Thanks for the great video, may I ask, Do You believe that has sense, valuing a company that is not on the stock's market by the Equity Value Method? Because if I do it ( total number of Shares x price of share) there is an incredible difference between the assets and the Equity Value. Thanks again and keep doing great content!

[@eric_andrews]

Yes of course. It's probably more useful for private companies than public ones, because public ones already have a price. Assets generally do not determine the value of a company very well (for most companies), equity value is a real valuation method. Most of the value of the company is in the sales, product, competitive advantage and team. None of that shows up on the balance sheet.

[@tatianadixon7493]

Hi Eric, I would like to reach out to you for a business inquiry. Do you have an email for this purpose? Thanks

[@pfknob]

This is incorrect!! The Seller gets to KEEP the cash. Typically, these are called, "no debt, no cash" acquisitions.