How is market capitalization calculated?

Market capitalization, or "market cap", is the aggregate market value of a company represented in a dollar amount. Since it represents the “market” value of a company, it is computed based on the current market price (CMP) of its shares and the total number of outstanding shares .

What is the difference between market capitalization and market cap?

Market capitalization is the total dollar value of all outstanding shares of a company at the current market price. Market cap is used to size up corporations and understand their aggregate market value. Companies may be categorized as large-, mid-, or small-cap depending on their market capitalization.

What is an example of market capitalization?

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. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million.

What is market capitalization & why is it important?

Market capitalization is a way to measure what a company's worth is. Essentially the collective price of all of a company's outstanding shares, market capitalization tells us about the value that investors put on a company's stock. And that tells us, indirectly, about what we can expect from the company in terms of returns.