In our Masterclass today we look at Market Capitalisation – also known as Market Value – which is a measure of the value and size in dollars of a company, and we calculate it by multiplying the number of either the outstanding shares or the floating (public) shares by the current price per share. So the capital value changes as the share price changes. It is a basic measure of a company – a way of determining a value of a company.
As an example, a company with 100 million shares of floating stock that has a current market value of $22 a share would have a market capitalization of $2.2 billion.
Outstanding shares include all the stock held by shareholders, while floating shares are those outstanding shares that actually are available to trade, ie. “publicly” available.
Market Capitalization, or Market Cap, is one of the criteria investors can use to choose a portfolio of stocks – often categorized as small-, mid-, and large-cap. Generally, large-cap stocks are considered the least volatile and small caps the most volatile.
Market Capitalization is sometimes used interchangeably with Market Value, in explaining, for example, how a particular index is weighted or where a company stands in relation to other companies.