Enterprise Value vs Equity Value: two values you should never confuse

Valuation discussions often use two similar-sounding terms: Enterprise Value (EV) and Equity Value. Confusing them can create very large misunderstandings.

What is Enterprise Value?

Enterprise Value is the value of the operating business independent of how it is financed. DCF using FCFF typically produces Enterprise Value first.

What is Equity Value?

Equity Value is the value attributable to shareholders. It is closer to what people usually mean when discussing the value of the shares or ownership interest.

The EV-to-Equity bridge

In simplified form:

Equity Value = Enterprise Value − net interest-bearing debt ± other non-operating adjustments

If Enterprise Value is HUF 800 million and net interest-bearing debt is HUF 200 million, indicative Equity Value may be around HUF 600 million.

Why not use total liabilities?

Because not every liability is financing debt. Trade payables, taxes payable and accruals should not automatically be treated like bank debt.

Likewise, not all cash is necessarily excess cash. A business needs operating liquidity, so only genuinely non-operating or surplus cash should be added separately where justified.

Why this matters in M&A

Many transactions use a cash-free, debt-free concept. Parties negotiate an operating Enterprise Value, then adjust for debt, cash and working capital at closing.

So when someone says “the company is worth one billion”, the correct follow-up question is: Enterprise Value or Equity Value?

GlobalTaxAI approach

The valuation report separates Enterprise Value and Equity Value and presents the EV-to-Equity bridge explicitly. Debt and non-operating adjustments derived from published accounts are treated as review points, not unquestionable facts.