Which of the following formulas correctly represents enterprise value (EV)?

• A. Equity value + Debt + Preferred + Minority Interest - Cash
• B. Equity value - Debt
• C. Debt + Cash
• D. Equity value + Cash - Debt

Answer: (A)

Enterprise value represents the total value of the company to all capital providers, i.e., what it would cost to acquire the business’s core operating assets. To capture this, you add up all the claims on the company beyond equity: debt, any preferred stock, and any non-controlling (minority) interests, and you subtract cash. Cash is subtracted because it is a non-operating asset that a buyer would not need to pay for as part of the operating business; the buyer can use or keep that cash after closing, so counting it as part of enterprise value would double-count it.

So the proper assembly is equity value plus debt plus preferred stock plus minority interest, minus cash. This mirrors the idea of purchasing the entire firm and assuming its obligations while stripping out non-operating cash. For intuition, if equity value is 100, debt 40, cash 10, and no minority or preferred, EV would be 130. If there’s minority interest and preferred stock, you add those as well and still subtract cash. Some definitions present it as equity value plus net debt (debt minus cash) plus minority and preferred, which conveys the same concept.