The Enterprise Value represents the value of the company’s CORE business operations.
Now, let’s translate this into a relatable example. Since we are talking about Formula 1, we’ll use a formula one car as an example. This won’t be a perfect translation, however will give you an idea of the difference between Equity value and Enterprise value.
Me and 9 of my friends decide to buy a used Formula One car from 1989. The cost is $250,000, split 10 ways. We each pony up $25,000 each, for a grand total of $250,000. We are aware that we will need to spend an additional $30,000 to get the car running (Liability), however the seller was generous and agreed to include a supercharger valued at $10,000 (Cash Equivalent) at no cost.
Relating this to “Equity Value” or a “Market Cap”, the equity value of the Formula 1 car would be $250,000.
Current Value Per “Share”
Equity Value ($250,000) = 10 Shares x $25,000
Relating the above to Enterprise Value, we would end up with a Enterprise Value of $270,000 as follows;