SHAREHOLDER EQUITY — VALUING YOUR COMPANY

Now that you have a better understanding of the calculation of enterprise value and what it means, we will make a comparison of two different companies to illustrate a point for our final stage of this article. (See Chart 4)

Company A has less sales, more profit, more EBITDA, more total enterprise value, less debt and more than four times the value accruable to the owners than Company B. Company B, in spite of its $6,000,000 in sales, has only a $500,000 equity value to the owners.