Definition
Equity value is the value attributable to shareholders after subtracting debt and other senior claims and adding cash (relative to enterprise value). Public-market equity value is often approximated by market capitalization.
Formula
Equity value = EV + cash - debt - preferred - minority + adjustments
Common mistakes
- Comparing equity value (market cap) to EV multiples (mismatch).
- Using inconsistent dates for EV and balance sheet inputs.
Measured as
Equity value = EV + cash - debt - preferred - minority + adjustments
Misused when
- Comparing equity value (market cap) to EV multiples (mismatch).
- Using inconsistent dates for EV and balance sheet inputs.
Operator takeaway
- Tie Equity Value to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Quantify the impact with Equity Value Calculator if you need to turn the definition into an operating assumption.
- Read Equity value explained: EV to equity bridge, net debt, and adjustments if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
Where to use this on MetricKit
Calculators
- Equity Value Calculator: Convert enterprise value (EV) into equity value using cash, debt, and other adjustments (optionally per share).
- Liquidation Preference Calculator (1x): Estimate investor proceeds at exit under a simple 1x non-participating liquidation preference vs converting to common (simplified).
- Multiple Valuation Calculator: Estimate enterprise value and equity value from a metric (ARR or revenue) and a valuation multiple (with net debt adjustments).
Guides
- Equity value explained: EV to equity bridge, net debt, and adjustments: Use this guide to move from enterprise value to what belongs to shareholders. Learn the EV-to-equity bridge, which claims and adjustments matter, and how to avoid date mismatches or double-counting.
- Liquidation preference: 1x payouts, conversion, break-even: How 1x non-participating liquidation preference changes founder payouts, when investors convert, and the break-even exit value.
- Multiple valuation: how to use ARR/revenue multiples and avoid mix-ups: A practical guide to multiple-based valuation: choosing a metric, applying EV multiples, and bridging to equity value via net debt.
- Fundraising & valuation hub: pre/post-money, SAFEs, notes, and liquidation prefs: A practical hub for startup fundraising and valuation basics: pre/post-money, pro rata, option pool shuffle, SAFE/note conversion, and liquidation preference outcomes.
- Valuation modeling hub: WACC, DCF, multiples, and equity value: A practical hub for valuation modeling: estimate a discount rate (WACC), run a simple DCF with sensitivity analysis, and translate enterprise value to equity value.