Understanding Market Capitalization
A 1-minute lesson from the MarketPro academy, one of 18 in stock market basics.
Market capitalization, or "market cap," is a simple way to estimate the total value the market currently assigns to a company. It is calculated by multiplying the current share price by the total number of outstanding shares.
Market capitalization, or "market cap," is a simple way to estimate the total value the market currently assigns to a company. It is calculated by multiplying the current share price by the total number of outstanding shares.
Market cap is often used to compare the relative size of companies, since share price alone can be misleading—a company with a high share price is not necessarily larger than one with a low share price if it has far fewer shares outstanding.
Common Size Categories
- Large-cap: generally well-established companies with a long operating history.
- Mid-cap: companies often in a growth phase, between large and small in size.
- Small-cap: smaller companies that may offer more growth potential alongside more volatility.
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