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EV = Market Cap + Net Borrowings

It is a measure of the value of a company’s businesses excluding the cash holdings and financial debt of the company. If a company has more cash than borrowings, then its EV will be Market Cap less the net cash position.

Why Do We Have to Look at EV and not just Market Cap?
EV is basically the value of a company excluding its cash and debt position. When buying a business, we need to consider the value of its business assets and cash position separately. This is because cash can be valued dollar-for-dollar while business assets (such as plant & equipment, inventory and intangibles) are collectively valued depending on the future income it can generate.

Since we are buying business assets and systems to generate future income streams, therefore we need to properly appraise the value of the business without distortion from cash holdings and debt.

Note: Companies do not publish their cash / debt position every day. So EV is calculated using the latest available audited balance.