Market Capitalization
Definition
The total market value of a company's outstanding shares of stock, calculated by multiplying share price by total shares outstanding.
Formula
Market Cap = Current Share Price × Total Outstanding SharesMarket capitalization, or market cap, is the total dollar value of a company's outstanding shares. It is calculated by multiplying the current stock price by the total number of outstanding shares. Market cap provides a quick way to gauge a company's size and value.
Companies are categorized by market cap: mega-cap ($200 billion+), large-cap ($10-200 billion), mid-cap ($2-10 billion), small-cap ($300 million-$2 billion), and micro-cap (under $300 million). Each size category has different risk and return characteristics.
Larger companies tend to be more stable and less volatile, while smaller companies offer higher growth potential with greater risk. Many investors diversify across market cap sizes to balance stability and growth. Market cap is used in constructing index funds, as most major indices weight companies by market cap.
Related Calculators
Related Terms
Securities
financeTradable financial instruments including stocks, bonds, and options that represent ownership, debt, or the right to buy or sell an underlying asset.
Dow Jones Industrial Average
financeA stock market index that tracks 30 large, publicly-owned companies trading on the NYSE and NASDAQ, serving as a benchmark for overall market performance.
S&P 500
financeA stock market index tracking 500 of the largest publicly traded companies in the United States, widely regarded as the best gauge of large-cap U.S. equities.
P/E Ratio (Price-to-Earnings)
financeA valuation metric that compares a company's current stock price to its earnings per share, indicating how much investors are willing to pay per dollar of earnings.
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