Quick Answer

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Equity value is the value attributable to a company's shareholders. Enterprise value represents the value of the underlying operating business across its capital structure.

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A simplified relationship is:

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Enterprise Value = Equity Value + Debt − Cash

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This distinction is particularly important in private equity, M&A and family-office direct investments.

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What Is Equity Value?

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Equity value represents the value belonging to shareholders.

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For a public company, the simplest version is:

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Share Price × Shares Outstanding

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For a private company, equity value may be derived from a transaction, financing round, appraisal or valuation methodology.

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What Is Enterprise Value?

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Enterprise value, or EV, attempts to measure the value of the operating business independent of how it is financed.

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A simplified formula is:

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EV = Equity Value + Debt − Cash

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More detailed calculations can also account for items such as preferred stock and other claims.

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Simple Example

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Suppose a family owns a company with:

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Enterprise Value: $100M

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The company has:

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Debt: $30M

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Cash: $10M

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Then simplified equity value is:

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$100M − $30M + $10M = $80M

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The operating business may therefore be worth $100 million, while shareholders' equity is worth approximately $80 million.

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Why Add Debt?

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Imagine buying the entire company.

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You acquire the operating business, but you also take responsibility for its debt.

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That's why enterprise value incorporates debt when assessing the value of the overall business.

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Why Subtract Cash?

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Cash held by the business reduces the effective economic cost of acquiring it.

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That is why excess cash is generally subtracted in the simplified enterprise-value calculation.

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Enterprise Value and EBITDA

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This is where the common:

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EV / EBITDA multiple

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comes from.

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If:

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Enterprise Value = $100M

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EBITDA = $10M

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then:

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‍EV / EBITDA = 10x

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Investors are valuing the operating business at ten times EBITDA.

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Why Family Offices Should Understand the Difference

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Suppose a family office owns 50% of a private company.

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Knowing that the company's enterprise value is $200 million does not necessarily mean the family's stake is worth $100 million.

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You need to account for the company's capital structure first.

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Example:

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Enterprise Value = $200M

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Debt = $60M

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Cash = $20M

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Simplified Equity Value:

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$200M − $60M + $20M = $160M

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A 50% ownership interest would therefore correspond to approximately:

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$80M of equity value

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before considering other adjustments.

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How MyFO Helps

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Many family offices have significant wealth tied to operating companies. For some families, the operating business is their largest asset. Others have built portfolios of direct ownership stakes across multiple private companies. Understanding how those businesses are performing, and what those ownership stakes are worth, is therefore an important part of understanding the family's overall wealth.

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With MyFO, families can connect directly to accounting systems such as QuickBooks, NetSuite, Sage and Xero through APIs, bringing operating-company financial data directly into MyFO.

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This includes the company's:

• Balance sheet
• Income statement
• Cash flow statement

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Instead of treating an operating company as a manually updated asset with a static valuation, MyFO can use this financial data to help families understand how the underlying business is actually performing.

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For EBITDA specifically, MyFO can use the company's financial data to normalize and calculate EBITDA, then track EBITDA over time. This gives families visibility into whether the operating performance and underlying value of the business are increasing or decreasing.

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MyFO also includes industry-specific valuation multiples based on data from NYU Stern School of Business, allowing families to apply an appropriate multiple to EBITDA to estimate the value of the company:

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Estimated Enterprise Value = EBITDA × Industry Multiple

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For example, if a business generates $5 million of EBITDA and the applicable industry multiple is 8x, its estimated enterprise value would be $40 million.

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MyFO also tracks ownership percentages within the underlying entities, so families can understand not only what the business is worth, but the value attributable to their specific ownership stake.

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If the attributable company value is $40 million and the family owns 25%, for example, its stake would be approximately $10 million, subject to any adjustments required to move from enterprise value to equity value.

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Families can also manually enter financial information, EBITDA and valuation assumptions when they do not want to connect an accounting system or want to use their own figures.

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This is particularly valuable for families whose wealth is concentrated in an operating business or who have invested directly in multiple private companies. MyFO brings financial performance, EBITDA, valuation, ownership and the family's attributable value together with the rest of the family's assets, providing a more complete picture of their overall wealth.

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Enterprise Value vs. Equity Value vs. Net Worth

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These terms answer different questions:

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Enterprise Value: What is the operating business worth?

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Equity Value: What is attributable to shareholders?

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Family Net Worth: What are all of the family's assets worth after liabilities?

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For a family office with substantial operating-company wealth, understanding all three is important.

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In One Sentence

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Enterprise value = value of the business.

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Equity value = value attributable to shareholders.

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Debt and cash are a major reason the two numbers can be very different.

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