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Finance Glossary

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Enterprise Value

Definition:

When you ask the question "What would it take to replace this thing right now?" you get the enterprise value. The number is used when deciding the total value of a business, usually. Insurance companies also consider it when deciding how much coverage a business needs.

Example

Let's say you set up a food truck selling anchovy sandwiches. The truck and everything in it set you back $100,000. You put down $50,000, and a bank gave you a business loan of $50,000. The equity value of the business is $50,000 because you've got debt, but the enterprise value is $100,000—that's what it would cost to replace everything and keep truckin' with the 'chovies.