How is equity value calculated for a company?

Equity value is calculated by multiplying the latest closing share price by the total diluted shares outstanding. This method gives a direct representation of the market's valuation of a company based on its stock price and the number of shares that investors own after considering convertible securities and options.

When a company is publicly traded, its equity value reflects how much shareholders believe the company is worth at a given moment in time, which is captured through its closing share price. The total diluted shares outstanding account for not only the basic shares but also any potential shares that could be issued through stock options, convertible debt, or any other dilutive securities. Therefore, this calculation provides a comprehensive view of the equity value, encompassing all avenues through which the company's shares could increase in number.

Other methods mentioned, such as multiplying total assets or adding liabilities to market capitalization, do not directly reflect how equity value is typically understood in the context of stock market transactions, and subtracting total expenses from revenue reflects operating performance rather than equity valuation.