Market Capitalization: What is it and How do You Calculate it?
Market capitalization refers to the market value of all of the outstanding shares of a company. Essentially, it is calculated by multiplying the current share price by the number of shares outstanding. For example, if Company X’s share price was $50 and there were 1 million shares outstanding, Company X’s market capitalization would be $50 million (1 million times $50). You can use this information as an investor when you try to figure out whether or not you should buy or sell stock in a company.
The Basics
Lets say a company has 1 million shares outstanding. If each share is worth $20, the market cap would be $20 million.
This metric is important because it gives you an idea of a company’s size. It’s also a good way to compare companies in the same industry because they will usually have similar market caps.
There are two types of market cap: primary and secondary. Primary market cap is what a company is worth when it first goes public.The Definition
Market capitalization, often referred to as market cap, is the total value of a publicly traded company’s shares. It’s calculated by multiplying a company’s share price by the number of shares outstanding. So, if a company has 1 million shares outstanding and its stock trades at $10 per share, its market cap would be $10 million.
You can read more about market cap definition here.
Example 1
Market capitalization, often shortened to market cap, is a measure of a company’s total value. This figure is calculated by multiplying the current share price by the number of shares outstanding. So, if Company XYZ has a share price of $10 and 10 million shares outstanding, its market cap would be $100 million.
Example 2
Check Apple Inc. Market Cap.
Is Market Cap Important?
Market capitalization, often referred to as market cap, is one of the most important metrics to look at when considering an investment in a publicly-traded company. It’s a measure of a company’s size, essentially, and can give you insight into its potential for future growth.
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