Market Capitalization?

Definition of Term [In Glossary]

What is Market Capitalization?

Market capitalization is the market value of a publicly traded company’s outstanding shares. It is commonly called market cap,

It is equal to the share price multiplied by the number of shares outstanding. Since outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company’s net worth and is a determining factor in some forms of stock valuation.

Market cap reflects only the equity value of a company. A firm’s choice of capital structure has a significant impact on how the total value of a company is allocated between equity and debt. A more comprehensive measure is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called the embedded value (EV) has been used.

Market capitalization is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures. It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. In performing such rankings, the market capitalizations are calculated at some significant date, such as June 30 or December 31.

The total capitalization of stock markets or economic regions may be compared with other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007 and rose as high as US$57.5 trillion in May 2008[5] before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008. In 2014 and 2015, global market capitalization was US$68 trillion and US$67 trillion, respectively.

 

LARGEST COMPANIES BY MARKET CAP FAQ

What Does Market Cap Indicate?

Market cap is short for market capitalization. Market cap is equal to a company’s total stock shares outstanding multiplied by its current stock price.

Does Market Cap Change Everyday?

Market cap changes everyday due to the fact that it is based on a company’s stock price.

What Do Shares Outstanding Mean?

Shares outstanding refers to the total number of stock shares held by a company’s shareholders.

How Does Market Cap Increase?

Market cap increases when a company’s stock price increases

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