Market Capitalization Calculation

Definition: Market capitalization (often referred to as market cap) is a measure of the size of a company. It tells you the value of the shares of a company. Investors often use the market cap to determine how big a company is. Traditionally, companies are divided into three groups: small cap, mid cap, and large cap. Small Cap refers to stocks with market cap of less than $1 billion. Mid Cap stocks are generally considered to be those with capitalizations between 1 billion to $10 billion. Large Cap stocks are generally defined by the company having a market cap of more than $10 billion.

Market capitalization can be calculated by simply multiplying the number of the outstanding shares of stock by the market price per share.

Formula:

Market capitalization = Number of outstanding shares * Current share price

Example 1:
If a company has 20,000,000 shares trading at $2 per share, its market cap would be: 20,000,000 * 2 = $40,000,000.

Example 2:
MBB Company has 60,000,000 shares outstanding, and each share is currently selling for $70. The company's market cap would be: 60,000,000 * $70 = $4.2 billion.

* Next: Market to Book Ratio Analysis & Example
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