1.5 KiB
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1.5 KiB
Executable file
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Market Capitalization (Market Cap)
Market capitalization (market cap) refers to the total value of a company's outstanding shares of stock. It is used as a measure of a company’s size and worth in the stock market.
Formula:
Market Cap = Stock Price × Total Outstanding SharesExample:
If a company has 10 million shares and each share is worth $50, the market cap would be:
10,000,000 × 50 = 500,000,000So, the company's market cap is $500 million.
Market Cap Categories:
- Small-cap: Less than $2 billion (e.g., early-stage or high-growth companies)
- Mid-cap: Between $2 billion - $10 billion (e.g., growing businesses)
- Large-cap: Over $10 billion (e.g., well-established companies like Apple, Microsoft)
Why is Market Cap Important?
- Indicates company size – Larger companies tend to be more stable, while smaller ones might have higher growth potential.
- Affects investment decisions – Large-cap stocks are often safer but may grow slower, while small-cap stocks can be more volatile but have higher growth potential.
- Used in stock indices – Major indices like the S&P 500 are weighted by market cap.
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