The Difference Between Market Value of Invested Capital (MVIC) and Enterprise Value (EV)

Throughout your finance career, you’ll develop a preference for the term market value of invested capital (MVIC) or enterprise value (EV) in reference to total firm value. What is the difference between market value of invested capital and enterprise value? Let’s start with similarities.

1. They are both measures of total firm value, that is they both measure the market value of the whole business.

2. They are both considered to be “capital structure neutral” in that ratios derived from these values can be compared to other similar companies with diverse capital structures.

3. Both facilitate relative value analysis.

What is the difference?

MVIC and Enterprise Value are terms that are frequently thrown and mean different things to different professionals. An academic might include ALL cash in MVIC, and a valuation analyst may only include an operating level of cash in MVIC. One investment banker may remove ALL cash from Enterprise Value where another may only remove excess cash.

So what is the difference? Put simply, it depends on who you’re talking to. If you’re listening to an analyst discuss MVIC or EV, further analysis is always necessary unless you’re familiar with the analysts work.

Does it matter if I use MVIC or EV?

Whether you use MVIC or EV doesn’t matter. What matters is that when you are performing a company valuation:

(1) If using a database to find your multiples, figure out what the convention is for firm value. If it is not explained, then calculate the multiples yourself.

(2) Apply apples to apples comparisons when using either of these two comparisons. That is, if you calculate MVIC multiples with an operating level of cash, only add excess cash to your subject company to arrive at a deal price. If you calculate MVIC multiples with the entire balance of cash, then do not add cash to your subject company to arrive at a deal price.