What is Market Capitalization?

GOLDSTONE LEARN

Different profit, Smarter profit. The works of our authors have appeared in the magazines of the whole world.

DEFINITION:

Market capitalization (also called “market cap”) is a way to measure the size of a company by multiplying the total number of shares by the share price.

Understanding market capitalization

Market capitalization indicates the dollar value of a company’s outstanding shares. To get this number, multiply the total number of shares in the company by the price of each share. When the stock price (or number of shares outstanding) changes, the company’s market capitalization also changes. Companies can be divided into three market capitalization categories: “Small Cap” ($300M-$2B), “Mid Cap” ($2B-$10B) and “Large Cap” ($10B+).

EXAMPLE

Apple became the first company in history to reach a market capitalization of $1 trillion on August 2, 2018. Do the math: its nearly 5 billion shares * the share price of $207.05 reached that day = $1 trillion. Since then, Amazon and Microsoft have also joined the “four comma club.”

Takeaway

Calculating market capitalization is like calculating the value of fruit on a pallet…

To quickly calculate the value of the fruit, multiply the number of oranges by their price. For example: 300 oranges * $2 = $600. Remember that the number of oranges (and their price) can change.

Scroll to Top