How is a company's equity value calculated?

The calculation of a company's equity value is fundamentally determined by multiplying the number of shares outstanding by the current share price. This approach captures the total market value of the company as perceived by investors, reflecting both the number of shares that are currently held by shareholders and the market's valuation of each individual share.

Equity value signifies what shareholders collectively own in the company, thus it's a direct representation of the ownership value based on market dynamics. Investors use this measure to assess the value of their investment and compare it with the company’s performance and potential growth.

In contrast, other options do not accurately represent how equity value is calculated and focus on different financial aspects of the company. For example, adding total liabilities to total assets would yield the total value of the firm, which combines equity and debt but doesn't isolate equity value alone. Dividing net income by shares outstanding calculates earnings per share (EPS), which is an important measure of profitability but does not directly determine the equity value. Meanwhile, summing total revenue and total cash does not provide a direct or meaningful measure of equity but rather combines various revenue and liquid assets without considering liabilities or the share structure.