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

Author

Kelvin Wong Loke Yuen is an experienced writer with a strong background in finance, specializing in the creation of informative and engaging content on topics such as investment strategies, financial ratio analysis, and more. With years of experience in both financial writing and education, Kelvin is adept at translating complex financial concepts into clear, accessible language for a wide range of audiences. Follow him on: LinkedIn.

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