Equity value

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Equity value is the value of a company available to owners or shareholders. It is the enterprise value plus all cash and cash equivalents, short and long-term investments, and less all short-term debt, long-term debt and minority interests.[1][2]

Equity value accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity.

From a mergers and acquisitions to an academic perspective, equity value differs from market capitalization or market value in that it incorporates all equity interests in a firm whereas market capitalization or market value only reflects those common shares currently outstanding.[3]

## Calculating equity value

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Equity value can be calculated in two ways, either the intrinsic value method, or the fair market value method. The intrinsic value method is calculated as follows:

Equity Value =
Market capitalization
+ Amount that in-the-money stock options are in the money
+ Value of equity issued from in-the-money convertible securities
- Proceeds from the conversion of convertible securities

The fair market value method is as follows:

Equity Value =
Market capitalization
+ fair value of all stock options (in the money and out of the money), calculated using the Black–Scholes formula or a similar method
+ Value of convertible securities in excess of what the same securities would be valued without the conversion attribute

The fair market value method more accurately captures the value of out of the money securities.

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Financial markets

Types of markets|

* Primary market
* Secondary market
* Third market
* Fourth market

Types of stocks|

* Common stock
* Golden share
* Preferred stock
* Restricted stock
* Tracking stock

Share capital|

* Authorised capital
* Issued shares
* Shares outstanding
* Treasury stock

Participants|

* Broker
* Floor broker
* Inter-dealer broker
* Broker-dealer
* Market maker
* Trader
* Floor trader
* Proprietary trader
* Quantitative analyst
* Investor
* Hedger
* Speculator
* Arbitrager
* Scalper
* Regulator

Trading venues|

* Exchange
* List of major stock exchanges
* Over-the-counter (off-exchange)
* Alternative trading system (ATS)
* Multilateral trading facility (MTF)
* Electronic communication network (ECN)
* Direct market access (DMA)
* Straight-through processing (STP)
* Dark pool (private exchange)
* Crossing network
* Liquidity aggregator

Stock valuation|

* Alpha
* Arbitrage pricing theory (APT)

* Beta
* Buffett indicator (Cap-to-GDP)
* Book value (BV)
* Capital asset pricing model (CAPM)
* Capital market line (CML)
* Dividend discount model (DDM)
* Dividend yield
* Earnings yield
* EV/EBITDA
* Fed model
* Net asset value (NAV)
* Security characteristic line
* Security market line (SML)
* T-model

Trading theories
and strategies|

* Algorithmic trading
* Buy and hold
* Contrarian investing
* Dollar cost averaging
* Efficient-market hypothesis (EMH)
* Fundamental analysis
* Growth stock
* Market timing
* Modern portfolio theory (MPT)
* Momentum investing
* Mosaic theory
* Pairs trade
* Post-modern portfolio theory (PMPT)
* Random walk hypothesis (RMH)
* Sector rotation
* Style investing
* Swing trading
* Technical analysis
* Trend following
* Value averaging
* Value investing

Related terms|

* Bid–ask spread
* Block trade
* Cross listing
* Dividend
* Dual-listed company
* DuPont analysis
* Efficient frontier
* Financial law
* Flight-to-quality
* Government bond
* Greenspan put
* Haircut
* Initial public offering (IPO)
* Long
* Mandatory offer
* Margin
* Market anomaly
* Market capitalization
* Market depth
* Market manipulation
* Market trend
* Mean reversion
* Momentum
* Open outcry
* Order book
* Position
* Public float
* Public offering
* Rally
* Returns-based style analysis
* Reverse stock split
* Share repurchase
* Short selling
* Short squeeze
* Slippage
* Speculation
* Squeeze-out
* Stock dilution
* Stock exchange
* Stock market index
* Stock split
* Stock swap
* Trade
* Tender offer
* Uptick rule
* Volatility
* Voting interest
* Yield

## References

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1. ^ "Equity Value". Corporate Finance Institute. Retrieved 2014-12-02.
2. ^ "Equity value". Practical Law. Retrieved 2014-12-02.
3. ^ "Enterprise Value vs Equity Value". Retrieved 2014-12-02.

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