Market capitalization, also known as "market cap," is a financial metric that represents the total value of a company's outstanding shares of stock. It is calculated by multiplying the company's current stock price by its total number of outstanding shares.
Market capitalization is one way to measure the size and value of a company. Companies with a larger market capitalization are typically considered to be more established and stable, while companies with smaller market capitalizations are often considered to be riskier investments with greater growth potential.
Market capitalization is typically divided into three categories:
Market capitalization can also be used to compare companies within the same industry or sector, or to compare a company to a stock market index or benchmark.
Let’s look at Apple Inc., a technology company that is publicly traded on the NASDAQ stock exchange.
As of February 23, 2023, Apple's stock price is $150 per share and the company has approximately 16.7 billion shares outstanding.
To calculate Apple's market capitalization, we simply multiply the stock price by the number of outstanding shares:
Market capitalization = Stock price x Outstanding shares
Market capitalization = $150 x 16.7 billion
Market capitalization = $2.505 trillion
Therefore, as of February 23, 2023, Apple's mar