marketcapitalization

Market capitalization, or market cap, is the total market value of a company’s outstanding shares. It is commonly calculated by multiplying the current share price by the number of shares outstanding. The result represents the equity value attributed by investors to the company on the public markets.

In practice, market cap is often categorized by size: large-cap (typically the largest companies), mid-cap, and small-cap, with some systems also using mega-cap or micro-cap segments. Some analyses use float-adjusted market capitalization, which multiplies the share price by the number of shares readily available for public trading, excluding restricted or closely held shares.

Market cap is widely used as a rough proxy for company size and as a basis for investment decisions and index construction. Many stock indices weight constituents by market cap, giving larger companies greater influence. Investment strategies may target specific cap segments, and fund managers may benchmark performance against cap-weighted indices.

Limitations include its sensitivity to stock price movements and its failure to reflect a company’s debt, cash, or growth prospects. Therefore market cap is not equivalent to enterprise value or intrinsic value. Currency translation, share classes, stock buybacks, and splits can also affect cap figures.

In practice, market capitalization applies to publicly traded companies. Private firms do not have a market cap in the same sense, though valuations may be assigned in private markets. Related concepts include enterprise value, free float, and capitalization-weighted indices.