Market Capitalization

AAA

DEFINITION of 'Market Capitalization'

The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.

Frequently referred to as "market cap."

INVESTOPEDIA EXPLAINS 'Market Capitalization'

If a company has 35 million shares outstanding, each with a market value of $100, the company's market capitalization is $3.5 billion (35,000,000 x $100 per share).

Company size is a basic determinant of asset allocation and risk-return parameters for stocks and stock mutual funds. The term should not be confused with a company's "capitalization," which is a financial statement term that refers to the sum of a company's shareholders' equity plus long-term debt.

The stocks of large, medium and small companies are referred to as large-cap, mid-cap, and small-cap, respectively. Investment professionals differ on their exact definitions, but the current approximate categories of market capitalization are:

Large Cap: $10 billion plus and include the companies with the largest market capitalization.
Mid Cap: $2 billion to $10 billion
Small Cap: Less than $2 billion

In order to make an investment decision, you may need to factor in the market cap of some investments. Read Understanding Small- And Big-Cap Stocks.

VIDEO

RELATED TERMS
  1. Large Cap - Big Cap

    A term used by the investment community to refer to companies ...
  2. Penny Stock

    A stock that trades at a relatively low price and market capitalization, ...
  3. Micro Cap

    A publicly traded company in the United States that has a market ...
  4. Mid Cap

    A company with a market capitalization between $2 and $10 billion, ...
  5. Mega Cap

    The biggest companies in the investment universe, as measured ...
  6. Nano Cap

    Small public companies with a market capitalization below $5 ...
RELATED FAQS
  1. How are blue-chip stocks similar to mutual funds and exchange-traded funds (ETFs)?

    Understand the primary differences between making investments in blue-chip stocks, mutual funds and exchange-traded funds ...
  2. What are examples of popular companies in the forest products sector?

    Investing in companies operating under the purview of the forestry trade allows for the inclusion of an alternative asset ...
  3. Are over-the-counter stocks different from other stocks?

    Explore the difference between stocks traded over-the-counter and those listed on the NYSE or Nasdaq. Learn how price affects ...
  4. What is the difference between enterprise value and equity value?

    Valuating a business accurately depends heavily on the purpose of the valuation. Learn how enterprise value and equity value ...
Related Articles
  1. Mutual Funds & ETFs

    Which Mutual Fund Market Cap Suits You?

    Different funds invest in companies with different market caps. Find out which is right for you.
  2. Markets

    Understanding Small- And Big-Cap Stocks

    If you don't realize how big small-cap stocks can be, you'll miss some good investment opportunities.
  3. Insurance

    Market Capitalization Defined

    Find out the differences between mega-, large-, mid- and small-cap stocks and how each suits different investing styles.
  4. Trading Strategies

    Small Caps Boast Big Advantages

    Find out why little companies have the greatest potential for growth.
  5. Investing Basics

    Small Cap Research Can Have A Big Impact

    Don't rely on Wall Street analysts for information on these stocks.
  6. Investing Basics

    How To Evaluate A Micro-Cap Company

    Learn how to think big by investing in smaller stocks.
  7. Active Trading

    Catching A Lift On The Penny Express

    The popularity of the penny stock market has grown, but are these stocks a safe bet?
  8. Investing Basics

    The Lowdown On Penny Stocks

    Think penny stocks will make you rich? If you don't understand the risks, you could end up penniless.
  9. Markets

    An Introduction To Small Cap Stocks

    When it comes to a company's size, bigger isn't always better for investors. Find out more here.
  10. Investing

    Are These 2015's Most-Promising Small-Cap Stocks?

    At least one of these small-caps should spike in 2015.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center