Equity Value
Equity value (or market cap) is the value attributable solely to shareholders: Enterprise Value - Debt + Cash - Minority Interest - Preferred Stock.
Concept map
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Definition
Equity value (or market cap) is the value attributable solely to shareholders: Enterprise Value - Debt + Cash - Minority Interest - Preferred Stock.
Use case
Used in corporate finance workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Equity Value
Equity value represents what shareholders actually own after all claims are satisfied. In acquisitions, buyers pay enterprise value but equity holders receive equity value (purchase price minus debt assumption plus net cash). Common equity value is after all senior claims (debt, preferred, minority interest).
Example: Acquisition scenario: Buyer pays EV of $1B, target has $300M debt, $50M cash. Equity value = $1B - $300M + $50M = $750M. This is what shareholders receive. If 10M shares outstanding, price per share = $75.