Market capitalization, often called "market cap," is the total market value of a publicly traded company's outstanding shares of stock. It is calculated by multiplying the current share price by the total number of shares outstanding. For example, if a company has 1 million shares outstanding and the current share price is $30, the market capitalization would be $30 million
. Market capitalization is used as a quick measure of a company's size and market value. It helps investors compare companies and categorize them into groups such as large-cap, mid-cap, and small-cap based on their market value. Unlike total sales or asset value, market cap reflects what the market currently values the company at, based on stock price and shares available
. The formula for market capitalization is:
Market Cap=Current Share Price×Total Number of Shares Outstanding\text{Market Cap}=\text{Current Share Price}\times \text{Total Number of Shares Outstanding}Market Cap=Current Share Price×Total Number of Shares Outstanding
Market cap fluctuates throughout the trading day as the stock price changes, while the number of shares usually remains constant unless new shares are issued or repurchased
. In summary, market capitalization represents the total dollar value of a company's equity as determined by the stock market, serving as a key indicator of company size and investment category
