What is the difference between market cap and enterprise value?
An example of an AI chatbot conversation about market cap vs enterprise value.
What is the difference between market cap and enterprise value?
Market cap is the total market value of a company's outstanding shares, while enterprise value includes market cap plus debt and minus cash.
Why is enterprise value considered a better measure?
Enterprise value provides a more comprehensive view of a company's total value, especially when considering acquisitions.
Can you give an example of how to calculate both?
Sure! If a company has 1 million shares at $50 each, its market cap is $50 million. If it has $10 million in debt and $5 million in cash, its enterprise value is $55 million.
Are there situations where one is preferred over the other?
Yes, investors often prefer enterprise value when evaluating companies with significant debt or cash reserves.
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