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What is the difference between market cap and enterprise value?

An example of an AI chatbot conversation about market cap vs enterprise value.

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You

What is the difference between market cap and enterprise value?

MagicBuddy
MagicBuddy

Market cap is the total market value of a company's outstanding shares, while enterprise value includes debt and cash.

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You

Can you give me an example of how to calculate both?

MagicBuddy
MagicBuddy

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.

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You

Why is enterprise value considered a better measure?

MagicBuddy
MagicBuddy

Enterprise value is often seen as a better measure because it accounts for debt and cash, providing a clearer picture of a company's total value.

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You

Are there any situations where market cap is more useful?

MagicBuddy
MagicBuddy

Yes, market cap is useful for assessing a company's size and comparing it with others in the same industry.

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