Enterprise Value (EV)

When you ask the question "What would it take to replace this thing right now?" you get the enterprise value.

Notionally, a home carries an enterprise value that is the sum of the equity down payment of $100k plus the loan of $400k that it took to buy the half million dollar shoebox in Palo Alto. The enterprise value of that home is the $500k.

Similarly, in a business, a given company might have $100M in cash flow, or EBITDA, in an industry in which it trades at the median multiple of its peer group of 10x EBITDA. But it has $300M in debt, and virtually no cash on hand. So its likely market value would be something close to $700M, well below its enterprise value of $1B.