Enterprise Value is defined as:

Enterprise Value is defined as:

• A. Operating assets minus operating liabilities
• B. Equity value plus debt minus cash
• C. Net income minus taxes
• D. Debt plus liabilities minus cash

Answer: (A)

Enterprise Value measures the value of the company’s ongoing operations to all capital providers. The clearest way to express that is by looking at the net value tied to operating activities: operating assets minus operating liabilities. This net operating assets view focuses on the core business, stripping out non-operating items like excess cash or non-operating investments, which EV is not meant to value directly. While you might also see EV written as equity value plus debt minus cash, that is an alternative formulation that relies on standard balance-sheet adjustments and can be less intuitive about how the operating business itself is valued. The other options describe earnings or mix balance-sheet items in ways that don’t directly capture the value of the company’s core operations.

Enterprise Value measures the value of the company’s ongoing operations to all capital providers. The clearest way to express that is by looking at the net value tied to operating activities: operating assets minus operating liabilities. This net operating assets view focuses on the core business, stripping out non-operating items like excess cash or non-operating investments, which EV is not meant to value directly.

While you might also see EV written as equity value plus debt minus cash, that is an alternative formulation that relies on standard balance-sheet adjustments and can be less intuitive about how the operating business itself is valued. The other options describe earnings or mix balance-sheet items in ways that don’t directly capture the value of the company’s core operations.