OK2

Market cap doesn't include net cash on hand.

That's why you could have some companies trading below net cash.

There is not much of an argument. Mathematically,market cap is shares out * price. Not to be confused with enterprise value which includes net debt.

I'm sure someone out there factors cash position in their valuation model which in turn affects stock price which in turn affects market cap.

You could say it implicitly includes cash. equity value = EV - debt + cash

finance_king - agreed mathematically. One follow-up would be the concept that "a dollar of cash is a dollar of cash". Unless it is trapped i.e. has tax liabilities or encumbered by any other assets / liabilities, should it not be accounted for fully in the market cap i.e. dollar for dollar (or at least close enough)? Am I missing something here?

Probably semantics--what do you mean by include? If you're asking "does market cap take into account the value of cash" the answer is yes. If you're asking "does market cap include cash in calculation the answer is no. Pretty straightforward, as you said.

Market cap is equity value.

The answer is straight up NO.

We are not equivocating "cash" as "liquidity source" or considering corner cases where companies are forced to hoard mountains of cash in lieu of repatriation.

Share price already includes value on surplus cash on hand. I'm a little confused by the question, but the key is not to double count it.

1 share = proportional claim over the company's assets.

Share price reflects market's view of value of company's assets less debt. ie value in use (= enterprise value excluding surplus cash and surplus assets) + value in exchange (= face value of cash surplus to business + market view on value of surplus assets) less debt.

In formula terms, you can show that as:

Market cap = EBITDA x implied EV/EBITDA of core business + surplus cash + implied market view on value of surplus assets - debt

Also, market cap = number of shares x share price

So market cap does implicitly include the value of cash. But you just calculate it as number of shares x share price.

"Surplus cash" - excludes cash on balance sheet that is necessary to run the business eg working capital.

Market Cap = Shares Out * Share Price ( we all know this already)

We obviously know shares out but what is share price? Share price is the present value of future cash flows. How do we determine future cash flows. Well no need to point out how to do this but cash on hand is typically left out the calculation to determine future cash flows. I say typically because cash on hand can be used in valuation but now you have to use a different formula and make beta adjustments and discount adjustments etc.

So, the answer is yes and no. If the answer is no cash/marketable securities are valued separately and added to market cap to arrive at value of the firm.