What is Market Cap(Market Capitalization)?

Market capitalization, or simply market cap, refers to the total market value of all the outstanding shares of a publicly held firm. This is calculated by multiplying the firm’s current share price by the number of outstanding shares.

The metric is often used to determine the size of a firm relative to others in the same industry. Market capitalization is the current valuation of the company from the stock market as opposed to the firm’s book value or total assets.

For instance, if the firm has 10 million outstanding shares valued at $50 each, then the market capitalization of the firm is $500 million.

What is the Formula for Market Capitalization?

Here is a practical example

A company has 500 million shares outstanding, trading at $40 per share.

Market Cap=500,000,000×$40=$20,000,000,000 

That company’s market cap is $20 billion.

What Are the Various Market Cap Segments?

Corporations can be divided according to their market cap levels, although there can be differences in the limits set on each segment depending on the market and investing platform.

These segments include:

• Mega-cap: Biggest corporations listed on the stock exchange, having market cap levels of hundreds of billions to trillions of dollars.
• Large-cap: Large corporations that have high market caps.
• Mid-cap: Corporations that fit in between large-cap and small-cap corporations.
• Small-cap: Corporations that are smaller in comparison to other companies and thus have smaller market caps.
• Micro-cap: Corporations that are smaller than small-cap corporations.

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