What is the equation for calculating equity value (EqV)?

Equity value (EqV) represents the portion of a company's value that belongs to its shareholders. To calculate equity value from enterprise value (EV), one needs to adjust for the company's net debt. The formula for equity value is expressed as follows:

Equity Value = Enterprise Value - Net Debt.

In this context, net debt is calculated as total debt minus cash and cash equivalents, which reflects the company's actual financial obligations. By subtracting net debt from the enterprise value, you are isolating the value attributable to equity holders, as enterprise value includes all stakeholders' claims on the company's assets, including debt holders.

The resulting figure is then divided by diluted shares outstanding to derive the equity value per share, which is crucial for investors and analysts when assessing the value of a company's stock. This approach offers a clearer picture of shareholders' actual equity stake in the company, accounting for its financial structure.