Market Capitalization

Market capitalization

The total dollar value of all outstanding shares. Computed as shares times current market price. Capitalization is a measure of corporate size.

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market capitalization

The total value of all of a firm's outstanding shares, calculated by multiplying the market price per share times the total number of shares outstanding. For example, at a current price of $50 for each of its 20 million shares of outstanding stock, a firm has a market capitalization of $50 × 20 million, or $1 billion. Also called market value.

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Market Capitalization

The total value of all outstanding shares of a publicly-traded company. The market capitalization is calculated by multiplying the shares outstanding by the price per share. Market capitalization is one of the basic measures of a publicly-traded company; it is a way of determining the rough value of a company. Generally speaking, a higher market capitalization indicates a more valuable company. Many exchanges and indices are weighted for market capitalization. It is informally known as market cap. See also: Large cap, Mid cap, Small cap.

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Market capitalization. Market capitalization is a measure of the value of a company, calculated by multiplying the number of either the outstanding shares or the floating shares by the current price per share.

For example, a company with 100 million shares of floating stock that has a current market value of $25 a share would have a market capitalization of $2.5 billion.

Outstanding shares include all the stock held by shareholders, while floating shares are those outstanding shares that actually are available to trade.

Market capitalization, or cap, is one of the criteria investors use to choose a varied portfolio of stocks, which are often categorized as small-, mid-, and large-cap. Generally, large-cap stocks are considered the least volatile, and small caps the most volatile.

The term market capitalization is sometimes used interchangeably with market value, in explaining, for example, how a particular index is weighted or where a company stands in relation to other companies.

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Market Capitalization

What Does Market Capitalization Mean?

The total dollar market value of a company's outstanding shares, calculated by multiplying the company's outstanding shares by the current market share price; the investment community uses this figure to determine a company's size (worth), as opposed to sales or total asset figures. Frequently referred to as market cap.

Investopedia explains Market Capitalization

If a company has 35 million shares outstanding with a current share price of $100, the company's market capitalization is $3.5 billion (35,000,000 × $100 per share). Company size is a basic determinant of asset allocation and risk-return parameters for stocks and stock mutual funds. The term should not be confused with a company's “capitalization,” which is a financial accounting term that refers to the sum of a company's shareholders' equity plus its long-term debt. The stocks of large, medium, and small companies are referred to as large-cap, mid-cap, and small-cap, respectively. In general, market cap breakdowns look like this: large cap: $10 billion or more, mid cap: $2 billion to $10 billion, small cap: less than $2 billion.

Related Terms:
• Asset Allocation
• Index
• Large Cap—Big Cap
• Mid Cap
• Small Cap