Tuesday, June 10, 2008

Market Capitalization - Definition

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 determining a company's size, as opposed to sales or total asset figures.

Frequently referred to as "market cap".

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).

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
Mid Cap: $2 billion to $10 billion
Small Cap: Less than $2 billion

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