Enterprise value estimates the value of the business’s operating activities. Equity value is the value left for its owners after the applicable debt, cash and other claims are accounted for. Equity value is not the same as the cash you receive from a sale.

Start with the operating business, then account for the claims

The simplified bridge used in the planning tools is:

Company equity value = enterprise value − debt + included cash ± other supported adjustments

Net debt combines the included debt and cash into one amount. Use the same valuation date and stated definitions throughout. A working-capital adjustment applies only on its specified basis; it is not automatically the full working-capital balance.

Multiplying supported Normalized EBITDA by an appropriate multiple is one way to estimate enterprise value. It is a valuation method, not the definition of enterprise value or proof of a buyer’s price. Other methods require their own cash-flow and claims treatment. Damodaran’s valuation explanation distinguishes valuing the business from valuing equity directly.

In a simplified hypothetical sale, $16 million of enterprise value less $2.5 million of net debt and a $500,000 agreed working-capital shortfall produces $13 million of company equity consideration. That is before the individual owner’s share, deal structure, fees and taxes.

Keep your ownership interest and closing cash separate

For a simple proportionate ownership structure, a 60% interest in $13 million of company equity is $7.8 million. Different ownership rights or claims can require a different allocation.

The amount paid at closing then depends on the actual terms. Seller financing, earnouts and rollover equity have different timing and risks. Transaction Value explains that next step. Do not describe company equity, your ownership interest and net closing proceeds as interchangeable numbers.

The Owner’s Scorecard records your business interest alongside other net assets. Its total Wealth goal is broader than business equity. Compare each goal with a result on the same basis.

Trace cash and debt together

Paying $100,000 of debt with $100,000 of cash leaves net debt unchanged at that instant. Earning and retaining new cash can reduce net debt, whether the company keeps that cash or uses it to repay borrowing. Future interest and risk effects require their own analysis.

Include each obligation or cash benefit once. A sale-related phantom award already deducted in the proceeds calculation must not be deducted again elsewhere. The reviewed model and deal assumptions determine the actual bridge.

Put the idea to work

Explore Module 2 to connect this idea to the work, evidence and tools. Browse all concepts or see the complete system.