Enterprise value

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1. Traditional corporate finance.


The total value of a commercial business, whether funded by equity alone or by a combination of equity and debt.

This total value, in this context is also sometimes known as the 'entity value' or 'aggregate value'.

In traditional corporate finance, where the business is funded by both debt and equity the EV is given by:

EV = market value of debt + market value of equity

2. Sustainability - integrated reporting.

A fuller and longer-term concept of value, taking account of the full range of factors that materially affect the ability of an organisation to create value over time.

This includes understanding of the organisation's different types of capita and their independencies, including:

  • natural capital,
  • intellectual capital,
  • human capital, and
  • social and relationship capital.

In theory - and assuming fully efficient and rational markets - this broader conception of value would already be reflected in the current market values of the organisation's debt and equity.

However, advocates of more fully integrated reporting believe that markets and market information are not yet fully efficient in this sense.

See also