Market Cap and Enterprise Value: formula
Market Cap and Enterprise Value: worked example
| Share price | $150 |
|---|---|
| Shares outstanding | 100,000,000 |
| Total debt | $4,000,000,000 |
| Cash and equivalents | $1,500,000,000 |
| Market capitalization | $15,000,000,000 |
| Enterprise value | $17,500,000,000 |
Market cap uses the share count outstanding, which excludes options and convertibles that could add shares. The debt and cash figures are from the last balance sheet and can be stale. A company's value depends on more than these figures, and market cap swings with the share price.
Market Cap and Enterprise Value: changing Share price
| Share price | Market capitalization | Enterprise value |
|---|---|---|
| $120 | $12,000,000,000 | $14,500,000,000 |
| $135 | $13,500,000,000 | $16,000,000,000 |
| $150 (example) | $15,000,000,000 | $17,500,000,000 |
| $165 | $16,500,000,000 | $19,000,000,000 |
| $180 | $18,000,000,000 | $20,500,000,000 |
Market Cap and Enterprise Value: compare input ranges
| Input | Tested from | To | Market capitalization: low input | Market capitalization: high input | Swing |
|---|---|---|---|---|---|
| Share price | $135 | $165 | $13,500,000,000 | $16,500,000,000 | $3,000,000,000 (20%) |
| Shares outstanding | 90,000,000 | 110,000,000 | $13,500,000,000 | $16,500,000,000 | $3,000,000,000 (20%) |
| Total debt | $3,600,000,000 | $4,400,000,000 | $15,000,000,000 | $15,000,000,000 | $0.00 |
| Cash and equivalents | $1,350,000,000 | $1,650,000,000 | $15,000,000,000 | $15,000,000,000 | $0.00 |
Market Cap and Enterprise Value: individual input comparisons
| Input | Value | Market capitalization | Enterprise value |
|---|---|---|---|
| Share price | $120 | $12,000,000,000 | $14,500,000,000 |
| $135 | $13,500,000,000 | $16,000,000,000 | |
| $150 | $15,000,000,000 | $17,500,000,000 | |
| $165 | $16,500,000,000 | $19,000,000,000 | |
| $180 | $18,000,000,000 | $20,500,000,000 | |
| Shares outstanding | 80,000,000 | $12,000,000,000 | $14,500,000,000 |
| 90,000,000 | $13,500,000,000 | $16,000,000,000 | |
| 100,000,000 | $15,000,000,000 | $17,500,000,000 | |
| 110,000,000 | $16,500,000,000 | $19,000,000,000 | |
| 120,000,000 | $18,000,000,000 | $20,500,000,000 | |
| Total debt | $3,200,000,000 | $15,000,000,000 | $16,700,000,000 |
| $3,600,000,000 | $15,000,000,000 | $17,100,000,000 | |
| $4,000,000,000 | $15,000,000,000 | $17,500,000,000 | |
| $4,400,000,000 | $15,000,000,000 | $17,900,000,000 | |
| $4,800,000,000 | $15,000,000,000 | $18,300,000,000 | |
| Cash and equivalents | $1,200,000,000 | $15,000,000,000 | $17,800,000,000 |
| $1,350,000,000 | $15,000,000,000 | $17,650,000,000 | |
| $1,500,000,000 | $15,000,000,000 | $17,500,000,000 | |
| $1,650,000,000 | $15,000,000,000 | $17,350,000,000 | |
| $1,800,000,000 | $15,000,000,000 | $17,200,000,000 |
Market Cap and Enterprise Value: combined input changes
| Share price / Shares outstanding | 80,000,000 | 100,000,000 | 120,000,000 |
|---|---|---|---|
| $120 | $9,600,000,000 | $12,000,000,000 | $14,400,000,000 |
| $135 | $10,800,000,000 | $13,500,000,000 | $16,200,000,000 |
| $150 | $12,000,000,000 | $15,000,000,000 | $18,000,000,000 |
| $165 | $13,200,000,000 | $16,500,000,000 | $19,800,000,000 |
| $180 | $14,400,000,000 | $18,000,000,000 | $21,600,000,000 |
Market Cap and Enterprise Value: which assumptions move the result?
Market Cap and Enterprise Value: values and definitions
| Quantity and definition | Value used |
|---|---|
| Share price | $150 |
| Shares outstanding | 100,000,000 |
| Total debt | $4,000,000,000 |
| Cash and equivalents | $1,500,000,000 |
| Market capitalization | $15,000,000,000 |
| Enterprise value | $17,500,000,000 |
Market Cap and Enterprise Value: half and double Share price
| Share price | Market capitalization |
|---|---|
| $75 | $7,500,000,000 |
| $150 | $15,000,000,000 |
| $300 | $30,000,000,000 |
Share price is the current market price. Shares outstanding counts the shares held by investors. The latest filing or quote page supplies that count.
Total debt and cash and equivalents come from the balance sheet. For enterprise value, some analysts also add preferred stock and minority interests and subtract non-operating assets, but debt less cash is the common shortcut used here.
Common error: Comparing market caps of companies with different debt. A heavily indebted firm looks smaller than the price of buying it outright.
Investing & Returns calculators: Book Value Per Share Calculator, Graham Number Calculator, Option Profit Calculator, Position Size Calculator, Risk Reward Ratio Calculator, Kelly Criterion Calculator.
Market cap is what the stock market says the shares are worth, and enterprise value is what it would cost to buy the whole business. Add the debt a buyer inherits, subtract the cash they get to use, and $15 billion of market cap becomes $17.5 billion of enterprise value. Two firms with the same market cap can carry very different debt, and only enterprise value shows it.
With an assumed $15 billion market capitalization, $3 billion debt and $0.5 billion cash, enterprise value is $17.5 billion; increasing debt to $3.5 billion raises that modeled value to $18 billion even when the share count, share price and cash have not changed. The balance-sheet date matters. Combining debt from one date with cash from another describes neither reported snapshot.
Use the P/E ratio, EPS and book value pages for per-share valuation, and the dividend yield calculator for income. The stock split calculator shows that a split changes price and shares but not market cap. A comparison of enterprise value to earnings is more meaningful than market cap when debt differs.
Does enterprise value equal a guaranteed acquisition price?
No. The example $15 billion equity value plus $4 billion debt less $1.5 billion cash gives a $17.5 billion shortcut. Preferred stock, minority interests, other adjustments and negotiated terms can matter.
Does a two-for-one split by itself change market cap?
No. Twice as many shares at half the price have the same product, absent other market-price changes.
What is the difference between market cap and enterprise value?
Market cap is the value of the equity. Enterprise value adds debt and subtracts cash to show what it would cost to buy the entire business.
What counts as a large-cap company?
Size labels depend on the index provider or research convention. A $10-billion boundary, or a $2-billion-to-$10-billion middle band, is not universal. Use the classification and valuation date of the source being compared; changing share price or shares outstanding can move the company across an assumed boundary.
Does a stock split change market cap?
No. A split multiplies shares and divides price by the same factor, so the product stays the same.