What does equity value describe?

• A. The market value of the company's equity.
• B. The book value of the company's equity.
• C. The enterprise value of the company.
• D. The net debt of the company.

Answer: (A)

Equity value is the market value of the company's equity—the amount investors would pay to own all the equity in the business. It’s usually calculated as share price times the number of shares outstanding, reflecting current market sentiment and liquidity. This differs from book value, which is the accounting value of equity on the balance sheet and can diverge from what the market is willing to pay. It also isn’t the same as enterprise value, which represents the total value of the company to all capital providers (debt, equity, and other obligations) and includes debt while adjusting for cash. Net debt is a separate measure of leverage, equal to debt minus cash. So the market value of the company’s equity best describes what equity value captures.