| Definition |
Total value of a company’s outstanding equity shares. |
Total value of a company including equity, debt, and cash. |
| Formula |
Share Price × Total Outstanding Shares |
Market Cap + Total Debt − Cash and Cash Equivalents |
| Includes Debt |
No, only considers equity value. |
Yes, includes debt obligations. |
| Includes Cash |
No, does not factor in cash or equivalents. |
Yes, cash is subtracted in the calculation. |
| Measure of |
Equity value or market value of shareholders' interest. |
Complete value of the company to all stakeholders. |
| Use in Valuation |
Used for categorizing companies (e.g., large-cap, mid-cap). |
Used in mergers, acquisitions, and relative valuation. |
| Impact of Debt |
Not reflected in the value. |
Fully reflected, making it a more comprehensive metric. |
| Investor Perspective |
Useful for retail investors analyzing equity only. |
Useful for analysts and acquirers assessing total firm value. |
| Accuracy |
Simpler but limited view of valuation. |
More accurate for comparing companies with different capital structures. |
| Capital Structure |
Ignores debt and cash; only reflects shares. |
Considers both debt and cash; reflects net worth. |
| Debt-Free Company |
Market Cap ≈ Enterprise Value if no debt or cash. |
Still calculated but identical to market cap in this case. |
| Impact of Cash Reserves |
Cash has no impact. |
Higher cash lowers the enterprise value. |
| Investor Focus |
Equity investors focus on market cap. |
Acquirers and analysts focus on enterprise value. |
| Volatility |
Can fluctuate with share price changes. |
More stable, less sensitive to daily price movement. |
| Listed Companies |
Only applicable to publicly traded companies. |
Applicable to both public and private firms. |
| Use in Ratios |
Used in P/E ratio, PEG ratio, etc. |
Used in EV/EBITDA, EV/Sales, etc. |
| Access to Data |
Easily available from stock prices. |
Requires more detailed financial data. |
| Perspective |
Shareholder-centric view. |
Firm-wide holistic view. |
| Impact of Buybacks |
Reduces market cap if shares are retired. |
May not change much unless debt/cash also affected. |
| Example Use Case |
Classifying a company as small-cap or large-cap. |
Evaluating takeover cost or comparing across industries. |
| Importance |
Basic measure of a company’s size in the stock market. |
Comprehensive metric for valuation and acquisition. |
market capitalization vs enterprise value