{"id":20847,"date":"2019-10-02T19:02:36","date_gmt":"2019-10-03T00:02:36","guid":{"rendered":"https:\/\/breakingintowallstreet.com\/biws\/?post_type=biws_kb&#038;p=20847"},"modified":"2024-12-16T23:18:01","modified_gmt":"2024-12-17T04:18:01","slug":"equity-value-vs-enterprise-value-and-valuation-multiples","status":"publish","type":"biws_kb","link":"https:\/\/breakingintowallstreet.com\/kb\/equity-value-enterprise-value\/equity-value-vs-enterprise-value-and-valuation-multiples\/","title":{"rendered":"Equity Value vs. Enterprise Value and Valuation Multiples (10:24)"},"content":{"rendered":"<style>.enteremail__large--inline{margin:60px auto!important}<\/style>\n<p>The key point is that regardless of how a company is financed, its Enterprise Value &#8211; and Enterprise Value-based multiples &#8211; do NOT change. Equity Value, however, may change depending on its share count and any shares it issues or repurchases.<\/p>\n<p>So even when a company changes its debt or equity or cash levels, <a href=\"https:\/\/breakingintowallstreet.com\/kb\/valuation\/valuation-multiples\/\" target=\"_blank\" rel=\"noopener\">valuation multiples<\/a> such as EV \/ EBITDA and EV \/ Revenue will not change immediately afterward&#8230; whereas a multiple such as P \/ E (Price Per Share \/ Earnings Per Share, or Equity Value \/ Net Income) will change if new equity has been issued.<\/p>\n<p>For more on this topic, see our full tutorial for <a href=\"https:\/\/breakingintowallstreet.com\/kb\/valuation\/ebit-vs-ebitda\/\" target=\"_blank\" rel=\"noopener noreferrer\">EBIT vs. EBITDA vs. Net Income<\/a>.<\/p>\n<div class='code-block code-block-2' style='margin: 8px 0; clear: both;'>\n<div class=\"kb-adinsert-modal\">\n    <div class=\"kb-adinsert-top\">\n      <div class=\"media\">\n          <img decoding=\"async\" class=\"alignnone size-full wp-image-28448\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/04\/24164120\/adv-fm-tile.png\" alt=\"PowerPoint Pro\" width=\"128\" height=\"128\" \/>\n      <\/div>\n      <div class=\"content\">\n          <h3>Master Financial Modeling for Investment Banking With <strong>BIWS Core Financial Modeling<\/strong><\/h3>\n      <\/div>\n    <\/div>\n    \n    <div class=\"full_text\">\n    \t<ul>\n        \t<li>\n            \t<h4>Become a financial modeling pro<\/h4>\n              <p>158 videos, detailed written guides, Excel files, quizzes, and more<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Complete 10+ detailed global case studies<\/h4>\n            <p>These include both the theory and the practical applications<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Prepare for your internship or full-time job<\/h4>\n            <p>Gain the skills you need to \u201chit the ground running\u201d on Day 1\n\n<\/p>\n\t\t\t  <\/li>\n      <\/ul>\n        \n      <a class=\"cta-link orange-button-medium\" href=\"https:\/\/breakingintowallstreet.com\/core-financial-modeling\/\" target=\"_blank\">Full Details<\/a>\n      \n      <a class=\"cta-link orange-button-medium bg-blue\" href=\"https:\/\/biws-support.s3.us-east-1.amazonaws.com\/Course-Outlines\/Core-Financial-Modeling-Course-Outline.pdf\" target=\"_blank\" rel=\"noopener\">Short Outline<\/a>\n    <\/div>\n<\/div><\/div>\n\n<p>It&#8217;s just like when you buy a house &#8211; house is worth $500K regardless of whether you pay with 100% cash or 50% cash and 50% debt, or anything else in between&#8230; but depending on how much cash and debt you use, your own EQUITY IN THAT HOUSE will be different.<\/p>\n<p>The $500K total value of the house is like the Enterprise Value for a company.<\/p>\n<p>And if you contribute $250K of your own cash and take on a $250K mortgage, the $250K you chip in is your &#8220;Equity Value&#8221; and the $250K mortgage is the &#8220;Debt.&#8221;<\/p>\n<p>Over time, your own &#8220;Equity Value&#8221; in that house will increase and your own &#8220;Debt&#8221; will decrease as you repay the mortgage, but the $500K total value for the house stays the same as long as the house&#8217;s intrinsic value remains the same.<\/p>\n<p>This example uses Coca-Cola&#8217;s filings and financial statements &#8211; you can find them and try this yourself right here:<\/p>\n<p><a href=\"https:\/\/www.coca-colacompany.com\/investors\/investors-info-reports-and-financial-information\/archives-annual-other-reports\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.coca-colacompany.com\/investors\/investors-info-reports-and-financial-information\/archives-annual-other-reports<\/a><br \/>\n<a href=\"https:\/\/www.coca-colacompany.com\/investors\/investors-info-quarterly-filings\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/www.coca-colacompany.com\/investors\/investors-info-quarterly-filings<\/a><\/p>\n<p>(NOTE: The numbers, of course, will be different if you look at this video at a later date, but the concept remains the same and has always been the same ever since Equity Value and Enterprise Value were invented.)<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn how Equity Value and Enterprise Value change when a company issues debt, pays off debt, issues equity, and repurchases shares.<\/p>\n","protected":false},"featured_media":21898,"template":"","class_list":["post-20847","biws_kb","type-biws_kb","status-publish","has-post-thumbnail","hentry","kb_category-equity-value-enterprise-value"],"acf":[],"_links":{"self":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb\/20847","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb"}],"about":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/types\/biws_kb"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media\/21898"}],"wp:attachment":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media?parent=20847"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}