Have you ever heard of the terms Firm Value and Enterprise Value and wondered what the difference is? The business world has its own language. In this case, these two terms refer to the overall value of an individual company or business.

Firm Value is the total value of a company’s assets, minus the liabilities and other obligations that it holds. This includes the value of its tangible assets (such as real estate and inventory) as well as its intangible assets (such as intellectual property and trademarks). Firm Value measures the overall financial health of the firm.

Enterprise Value takes Firm Value one step further, incorporating equity into the equation. It’s calculated by adding up the total value of all of a company’s securities (which includes debt and preferred shares), plus any minority interests in other entities, then subtracting out cash on hand. This figure measures how much a company would be worth if the equity was purchased on the open market, providing a full picture of the company’s true value.