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Market capitalization
Market capitalization
(market cap) is the market value at a point in time of the shares outstanding of a publicly traded company, being equal to the share price at that point of time multiplied by the number of shares outstanding.[2][3] As outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation. Market capitalization
Market capitalization
is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures. It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. (See List of stock exchanges.) In performing such rankings, the market capitalizations are calculated at some significant date, such as June 30 or December 31. The total capitalization of stock markets or economic regions may be compared with other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007[4] and rose as high as US$57.5 trillion in May 2008[5] before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008.[5] In 2014 and 2015, global market capitalization was US$68 trillion and US$67 trillion, respectively.[6]

Contents

1 Calculation 2 Market cap terms 3 Related measures 4 See also 5 References 6 External links

Calculation[edit] Market cap is given by the formula

M C = N × P

textstyle MC=Ntimes P

, where MC is the market capitalization, N is the number of shares outstanding, and P is the closing price per share. For example, if some company has 4 million shares outstanding and the closing price per share is $20, its market cap is then $80 million. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million. This is in contrast to mercantile pricing where purchase price, average price and sale price may differ due to transaction costs. Market cap terms[edit] Traditionally, companies were divided into large-cap, mid-cap, and small-cap.[2] The terms mega-cap and micro-cap have also since come into common use,[7][8] and nano-cap is sometimes heard. Different numbers are used by different indexes;[9] there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and market caps are likely to be different country to country. Related measures[edit] Market cap reflects only the equity value of a company. It is important to note that a firm's choice of capital structure has a significant impact on how the total value of a company is allocated between equity and debt. A more comprehensive measure is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called the embedded value (EV) has been used. See also[edit]

List of finance topics List of corporations by market capitalization Market price Market trend Middle-market company Public float Shares authorized Treasury stock

References[edit]

^ "Market highlights for first half-year 2010" (PDF). World Federation of Exchanges. Archived from the original (PDF) on July 22, 2013. Retrieved May 29, 2013.  ^ a b "Market Capitalization Definition". Retrieved April 2, 2013.  ^ "Financial Times Lexicon". Retrieved February 19, 2013.  ^ Global stock values top $50 trln: industry data (Reuters) ^ a b WFE Report Generator including report for Domestic Market Capitalization 2008 Archived October 8, 2008, at the Wayback Machine. (World Federation of Exchanges) ^ WFE Full Year Statistics 2015 (World Federation of Exchanges) ^ "Mega Cap Definition". Retrieved April 2, 2013.  ^ "Micro Cap Definition". Retrieved April 2, 2013.  ^ Definition of Market Capitalization

External links[edit]

Look up market capitalization in Wiktionary, the free dictionary.

How to Value Assets – from the Washington State (U.S.) government web site Year-end market capitalization by country – World Bank, 1988–2010

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