Market Capitalization - Definition & How to Calculate

What is market capital of a company

Market capitalization, often called market cap, measures a company's total value in the stock market. It is calculated by multiplying the current share price by the total outstanding shares. Market cap reflects the perceived worth of a company by investors and is used to compare companies of different sizes within the same industry.

Market Capitalization Calculator

Now the question arises how do you calculate the Market Cap? To calculate market capitalization, multiply the current share price by the total outstanding shares. For example, if a company has 10 million outstanding shares and each share is trading at $50, its market cap would be $500 million. It provides valuable insight into a company's size and allows investors to gauge its potential risk and return.

Market cap categories are often used to classify companies into small-cap, mid-cap, or large-cap based on their total value. Small-cap companies have lower market caps and are often considered riskier but with potential for high returns, while large-cap companies tend to be more stable but with slower growth potential.

When evaluating investment opportunities and building a diversified investment portfolio that aligns with their financial goals and risk tolerance levels, understanding market capitalization is crucial for investors.