What is market capitalization?

Definition

One way to gauge the size of a company is by using its market capitalization or market cap, which is calculated by multiplying its stock price by the total number of shares.

Understanding market capitalization

One way to measure the value of a company is through market capitalization, which represents the dollar value of its outstanding shares. This is calculated by multiplying the total number of shares by the price per share. The market cap can change as the stock price fluctuates or the number of shares outstanding changes. Based on their market capitalization, companies can be classified into three categories: "small cap" ($300M-$2B), "mid cap" ($2B-$10B), and "large cap" ($10B+).

Example

On August 2, 2018, Apple reached a market capitalization of $1 trillion, making it the first company ever to do so. This was calculated by multiplying its approximately 5 billion outstanding shares by the share price of $207.05 that it reached on that day. Since then, both Amazon and Microsoft have also achieved a market cap of over $1 trillion.

Gist

One way to calculate the value of the oranges is by multiplying their quantity with their price. For example, if there are 300 oranges priced at $2 each, then the total value would be $600. It is important to note that both the quantity and price of oranges may fluctuate.