Equity Value
Definition
The value attributable to the shareholders of a business after deducting all debt and debt-like obligations from enterprise value. Equity value represents what the owners would receive if the business were sold and all liabilities settled. It is calculated as enterprise value minus net debt, minority interests, and preferred equity.
Complementary Terms
Concepts that frequently appear alongside Equity Value in practice.
The total value of a company's or fund's assets minus its liabilities. For investment funds, NAV represents the per-share or per-unit value.
The net asset value of a company as recorded on its balance sheet, calculated as total assets minus total liabilities. Book value often significantly understates the true worth of intangible-rich businesses because many intangible assets are not recognised under accounting standards.
The total value of a business including both equity and debt, minus cash. Calculated as market capitalisation plus total debt minus cash and equivalents.
Net income divided by shareholders' equity, measuring the return generated on owners' invested capital. High ROE can indicate efficient use of equity but should be interpreted alongside leverage levels and the quality of earnings.
The measure of the value of goods and services produced, calculated as revenue minus the cost of purchased inputs (services, energy, and materials). GVA captures the value a company creates through its own activities and is a core productivity metric in the Opagio framework.
The estimated value of a business or asset beyond the explicit forecast period in a discounted cash flow analysis, representing the bulk of total enterprise value for long-lived assets. Terminal value is calculated using either a perpetuity growth model or an exit multiple approach and is particularly significant for intangible-intensive companies with long-duration competitive advantages.
The total net revenue a business expects to earn from a single customer over the entire duration of the relationship. LTV is driven by average revenue per user, gross margin, and retention rates, and is directly influenced by brand and relationship intangibles.
The intangible premium that a business commands above the fair value of its net tangible assets, reflecting factors such as brand strength, regulatory licences, customer loyalty, and market position. Franchise value is a critical concept in financial services and regulated industries where the right to operate carries significant economic worth.
Put this knowledge to work
Use Opagio's free tools to measure and grow the intangible assets that drive your business value.