Market Capitalization of Invested Capital

Posted in Finance, Accounting and Economics Terms, Total Reads: 867
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Definition: Market Capitalization of Invested Capital

It is another term for market value of invested capital. Market capitalization of invested capital is the total present value of the capital invested in a company. In other words, it is the total value of the owner’s equity as well as the long term debt. When a business sale takes place, this includes the value of the tangible assets and excludes company owned real estate, earnouts, etc. The abbreviated form of this term is MVIC. It is used to denote the total value of businesses.

 

Formula : MVIC = Value of owner’s equity + value of long term debt

 

In case of a business sale, MVIC = Value of owner’s equity + value of long term debt + value of tangible assets

 

Example -  

Consider there is a firm ABC having owner’s equity of $100000 and a long term debt of $20000. Also, consider that it has inventory worth $1000 and machinery worth $2500. Then the firm’s market capitalization of invested capital is

MVIC = 100000 + 20000 + 1000 + 2500 = $123500


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