What is a Market Cap or Market Capitalization?
The total dollar market value of a company’s outstanding shares (stock shares available for the public to own). The Market Cap is what the news is referring to when they say a publicly traded company is worth a certain amount.
The market cap is calculated by multiplying the current share price of a company’s stock with the shares outstanding. Investors can then use the market cap to determine the size of a publicly traded company.
Why You Care
Investors need to determine company size to base their asset allocation and risk-return parameters. Traders would like to know if the stock they are investing in is small cap (less than $2B), mid cap ($2B to $10B) or large cap (over $10B).