Enterprise Value vs. Market Cap
Market cap is what you pay for equity. EV is what you pay for the whole business.
Market cap vs. enterprise value
Market capitalization = share price × shares outstanding. It tells you what the public market thinks the equity is worth. Enterprise Value = Market Cap + Total Debt − Cash & Equivalents. It represents the theoretical takeover price — what you'd pay to own the whole business outright, including its debt obligations.
Why subtract cash?
If you acquire a company with $500M in cash and $1B in debt, you inherit both. The cash offsets some of your debt burden, so it reduces the effective acquisition cost. EV strips this out to give a cleaner view of operating value.
When to use each
Use market cap when you're thinking about equity returns (EPS growth, dividends). Use EV when comparing businesses across capital structures — comps, M&A analysis, and most valuation multiples (EV/EBITDA, EV/Revenue) use EV as the numerator.