In contrast to market capitalization, enterprise value reflects the total amount of capital invested in a company, including its debts. An enterprise value is calculated by adding all of a company's debts to its market capitalization and subtracting its cash. Investors use enterprise value to estimate the cost of buying and taking a company private. The enterprise ratio, for example, is a valuation metric that uses it.

Market capitalization (market cap) and enterprise value (EV) are financial metrics used to evaluate a company's value. Market capitalization is the total value of a company's outstanding shares of stock, calculated by multiplying the current stock price by the number of outstanding shares. It reflects the market's perception of a company's equity value.

In contrast, enterprise value provides a more comprehensive valuation by considering the company's total value. EV includes market capitalization plus debt, minority interest, and preferred shares, minus total cash and cash equivalents. This metric accounts for the company's debt and cash levels, offering a clearer picture of its overall financial health and value. While market cap focuses solely on equity, EV gives a holistic view, incorporating both equity and debt.