FINANCIAL BASICS: MARKET CAPITALISATION AND ENTERPRISE VALUE
1. Market Capitalisation: This is simply the number of shares that a company has issued or has in existence – called shares outstanding – times the share price. However, if you’re assessing the value of a company or what it’s worth, market capitalisation does not give you the full picture.
Remember the earlier article about Netflix and the drop in its market cap? You can read that again here as a way to really seal in these terms: https://bit.ly/3yRW90d
2. Enterprise Value: A popular measure of the overall value of a business, in that it is a calculation of its current worth. In simple terms, it is the company's market value of equity (its market capitalisation) plus its net debt, also known as the debt it owes minus the cash that it has to pay it back.