Why is market cap important?

Market cap allows investors to evaluate a company based on how valuable the public perceives it to be. Investing across market caps can help create a diversified portfolio. What is market capitalization? Market capitalization, or market cap, is the total value of a company’s shares of stock.

How do you calculate market cap?

(in mil. US$) Market cap is given by the formula , where MC is the market capitalization, N is the number of common shares outstanding, and P is the market price per common share. For example, if a company has 4 million common shares outstanding and the closing price per share is $20, its market capitalization is then $80 million.

Which company has the largest market cap?

Apple Inc. (AAPL) has the largest market cap of any company in the world. As of Q2 2022, it is worth nearly $3 trillion. It is followed by Microsoft (MSFT) and Alphabet (GOOG) at around $2.3 trillion apiece. Why Are Stocks Measured by Market Capitalization? Market cap is a useful measure of a company's overall value, as the market sees it.

Can market cap go up?

The simplest way for market cap to go up is for the stock price to rise. But since market cap equals stock price multiplied by shares outstanding, a higher share count can increase market cap as well. This was seen most notably with many so-called “meme stocks” in 2021.