Short definition: Equity value is the total value of a company’s shares owned by shareholders.
Explanation: It represents the residual value of a company’s assets after all liabilities (debts) have been paid off. Equity value is calculated by multiplying the current market price of a company’s shares by the number of outstanding shares.
Example: If a company has 10 million outstanding shares and each share is trading at $50, then its equity value is $500 million.
Additional information (optional): Equity value is a key metric used in various financial analyses, such as valuation ratios and M&A transactions. It is often compared to enterprise value, which also takes into account a company’s debt and cash.