Market capitalization

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Market capitalization, also referred to as "market cap", is the total value of all outstanding shares of a company multiplied by the stock price; usually used to measure the size of a corporation. Market capitalization represents the aggregate value of a company or stock. The investment community uses this figure in determining a company's size, as opposed to sales or total asset figures. Market cap terms are relative and are constantly changing as companies get bigger and smaller.

Market cap is used to classify stock in ranges. Exact market cap ranges will vary among different financial and rating institutions, but there are three different terms commonly used to describe stocks by their general size. 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:[1]

Table 1. Market Capitalization
Size Characterization Capitalization Range
Large Capitalization Stocks over $10 billion dollars
Mid Capitalization Stocks between $2 billion and $10 billion dollars
Small Capitalization Stocks between $300 million and $2 billion dollars

While these are the most common market cap references, there are also some less commonly used: mega cap, micro cap, and nano cap. Market cap terms are relative and are constantly changing as companies get bigger and smaller.

References

  1. Market Capitalization Defined, investopedia, viewed 23 January 2015.

External links