Market Capital and Enterprise Value

Market Capital:- 

The amount required to be an Owner of the company, means if you want to buy any particular company you can check market capital of the company.

Market Cap. ~ share price * no. of sahres 

Enterprise Value:- 

It denotes the real value of the Company to buy or to become an owner,

Then what is the difference between the term "Market Cap." and "Enterprise Value"?

Let's understand in Market Cap. we do not talk about companies cash and debt while in enterprise value we add both.

Let us take an example, if you want to Buy a company and company owner wants 100Rs for his company to sell that means the market cap.is 100Rs, Now imagine you buy that company and there is the Vault in the company having 20Rs inside it which now it's your's and Company's Ex-Owner already told you that the company has 10Rs Debt(loan) which now you have to pay as you are the current owner.

Now understand that you buy the company of 100Rs and you get 20Rs in the Vault and you have to pay 10Rs as debt. So in real you buy the company of Rs90 as you get 20 in vault and you paid 10Rs as debt., Now see below for Numeric understand.

Enterprise Value= Market Cap. - Cash + Debt(loan)

Enterprise Value=100Rs - 20Rs + 10Rs

                               = 90Rs

Now you understand both Market Cap. and Enterprise Value, if any any other query you can suggest us and any suggestion you want to give then Comment us.