When shareholders or partners go their separate ways, disputes often arise over the value of commonly held assets. In my valuation experience, some of that friction occurs because the parties involved don't understand two commonly misunderstood concepts in business valuation, Enterprise value and Equity value.
To eliminate one of the sources of dispute before it erupts, this article explains the key difference between Enterprise value and Equity value, and the circumstances in which each value is relevant.
For simplicity, I have used the example of a business operated through a corporate entity, although the concepts apply equally to businesses operated through alternative trading vehicles such as trusts and partnerships.
