Market Capitalization is defined as the total market value of a company's outstanding shares. Market capitalization can be calculated by multiplying the number of shares outstanding (this includes the value of all listed categories of a corporation's stocks - preference shares, ordinary shares, etc) by the market price per share which is the current value of a company on the Stock Exchange. For example, if a company has 10 million shares, and the current price per share is $10, then the company's market capitalization is (10 million shares x $10) $100 millions.
Investors and analysts use market capitalization (often referred to as "market cap") to gauge a company's size and indicate how much the company is worth.
Classification - companies can be divided between small, mid, and large cap.
- Small cap companies have market cap under $1B
- Mid cap companies have market cap between $1-5B
- Large cap companies have market cap over $5B.
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