What is the primary distinction between Enterprise Value and Equity Value?

The primary distinction between Enterprise Value and Equity Value lies in what each metric represents concerning a company's overall value and its stakeholders. Enterprise Value is a comprehensive measure that captures the total value of a business attributable to all providers of capital, including both equity investors and debt holders. It reflects the market value of the business as a whole and takes into account the company's debt, subtracting cash and cash equivalents. This makes Enterprise Value an appropriate metric for assessing what it would cost to acquire the entire company, as it encompasses all financial claims on the company's assets.

In contrast, Equity Value specifically indicates the portion of the company that is available to equity shareholders, after taking the company's debt obligations into account. Therefore, while Equity Value is vital for understanding the portion of value attributable to shareholders, it does not consider the financial claims of debt holders, making it a narrower measure than Enterprise Value.

The other options do not correctly capture the distinctions: one suggests that Enterprise Value is solely for shareholders, which is inaccurate as it relates to all investors; another incorrectly states that Equity Value includes all investor contributions, while in reality, it only refers to equity; finally, the option equating Equity Value to total cash held by a company misrepresents what Equity Value signifies.