Chukwudi Maranne

Equity Value, also known as market capitalization, is the total of the shareholders’ values available for the business and can be calculated by multiplying the market value per share by the total number of shares outstanding. It is very important for a business owner, especially when he plans to sell his business, as it gives a good measure of what a seller of business would receive after the debt has been paid.

Let us look at the above graph of the Equity Market Value of Exxon, Apple, and Amazon. We note that in 2007-08, Exxon was far ahead in market value compared to Amazon and Apple. However, Apple and Amazon’s market value has catapulted over the years, and now they are leading companies. Does it even matter?

There are two ways in which you can calculate Market Value of Equity

Equity Value = Share Price x Number of Oustanding Shares

This second equity market value formula is commonly used to find the “fair equity value” (using DCF Approach)

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Equity Value (wallstreetmojo.com)

We use the following steps to calculate the fair equity market value –

Target Price of the stock = Fair Equity Value / Number of Oustanding Shares

Please note that the Market Price of stock and the Target Price of stock are two different things.

Let us assume that the Market Price of Apple is $110 per share. Using DCF, you may get a target priceTarget PricePrice Target in the context of stock markets, means the expected valuation of a stock in the coming future and the valuation may be done either by the stock analysts or by the investors themselves. For an investor, price target reflects the price at which he will be willing to buy or sell the stock at a particular period of time or mark an exit from their current position.read more of Apple stock as $135 per share. This means that Apple is undervalued and should reach the target of $135 per share shortly.

Equity value is more useful to a business seller than an investor. Let’s have a detailed look at this.

Let’s say that Mr. A has a company he wants to sell. Now he is concerned about the valuation of the company. One day, while searching for buyers for his business, Mr. A got a proposal from Mr. B. Mr. B said he would buy Mr. A’s business at a certain valuation. Mr. A went back home and thought about the valuation Mr. B gave. Mr. A mentioned that he had taken some loans for his business, which have not been fully paid yet. Mr. B said he would pay the same as the valuation he had calculated; however, Mr. A will only receive the money after paying the debt. And that’s “market value of equity” in the true sense.

Now let’s understand it in numbers. Mr. B said he would pay the US $10 million for Mr. A’s business before knowing that Mr. A still has to pay some debt. Mr. A mentioned that the outstanding debt is US $2 million. Then Mr. B agreed to pay Mr. A US $10 million for the business, including the outstanding debt. That means Mr. A would only get US $8 million. Here the US $10 million is the enterprise value, and the US $8 million in the equity market value.

Let us do a basic example of comparing two companies based on market value and finding the larger one. Here are the details of Company A and Company B –

In this case, we have been given both the numbers of outstanding shares and the market price of shares. So let’s calculate the equity market value of Company A and Company B.

We note that the market value is more than the market value of Company B. But let’s tweak a few things and calculate Enterprise Value and let’s see how it turns out for investors.

Please have a look at the table below.

source: ycharts

If you want to calculate the Market Value of Facebook, it is simply the outstanding number of shares (2.872 billion) x Price ($123.18) = $353.73 billion.

In the final analysis, it can be said that equity value is the best method if the owner of a business wants to know how much he would get by selling his business. However, from the investors’ point of view, enterprise value will fit the bill.

This article has guided what equity value is and its definition. Here we discuss examples of a firm’s equity value and its interpretations and how it is useful to sellers. You may also look at the following articles to learn more about valuations –

Español

Anyone who has ever been on a diet knows there are sensible ways to lose weight, including eating a balanced diet and exercising.

There are also reckless ways to shed pounds, such as fads and diet aids that promise rapid weight loss but often recommend potentially dangerous practices. Those include HCG weight-loss products that are marketed along with advice for users to follow a severely restrictive diet.

The Food and Drug Administration (FDA) is advising consumers to avoid human chorionic gonadotropin (HCG) weight-loss products. These products are typically sold in the form of oral drops, pellets and sprays, and can be found online, at weight loss clinics and in some retail stores.

HCG is a hormone produced by the placenta during pregnancy.

Products marketed for weight loss that claim to contain HCG are typically marketed in connection with a very low-calorie diet, usually one that limits calories to 500 per day. Many of these popular HCG products claim to “reset your metabolism,” change “abnormal eating patterns,” and shave 20 to 30 pounds in 30 to 40 days.

“These products are marketed with incredible claims, and people think that if they're losing weight, HCG must be working,” said Carolyn Becker, director of the Office of Unapproved Drugs and Labeling Compliance in the FDA’s Center for Drug Evaluation and Research. “But the data simply do not support this; any loss is from severe calorie restriction. Not from the HCG.”

The FDA has approved HCG as a prescription drug for the treatment of female infertility and for other medical conditions. HCG is not approved for use without a prescription for any purpose. It is not approved for weight loss.

In fact, the prescription drug label notes there “is no substantial evidence that it increases weight loss beyond that resulting from caloric restriction, that it causes a more attractive or ‘normal’ distribution of fat, or that it decreases the hunger and discomfort associated with calorie-restricted diets.”

Living on 500 calories a day is not only unhealthy but also dangerous. People on such restrictive diets are at increased risk for side effects, including  gallstone formation, an imbalance of the electrolytes that keep the body’s muscles and nerves functioning properly, and an irregular heartbeat. Such restrictive diets can be dangerous, even potentially fatal.

Very low-calorie diets are sometimes prescribed by health care professionals for people who are moderately to extremely obese as part of medical treatment to lessen health conditions caused by obesity, such as high blood pressure. But even then, strict and constant medical supervision is needed to ensure that side effects are not life-threatening. Without medical oversight, people on very low-calorie diets may not be getting enough vitamins, minerals and — most important — protein. If you want to lose weight, do it gradually and reduce the calories you eat every day.