Equity value

Encyclopedia : E : EQ : EQU : Equity value

Equity value is a market-based measure of the value of a firm. It accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity. Equity value differs from market capitalization in that it incorporates all equity interests in a firm whereas market capitalization only reflects those common shares currently outstanding.

Calculating Equity Value

For a publicly-traded company, the following represents the basic components of equity value:

Equity Value =
Market capitalization
+ Value of in-the-money stock options
+ Value of equity issued from in-the-money convertible securities
- Proceeds from the exercise of stock options and/or convertible securities

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