Market Capitalization
Quick definition: Market capitalization is the total value of a company's shares: the share price multiplied by the number of shares outstanding.
In plain English
Market cap = share price × number of shares outstanding
It shows how big the market thinks a company is.
Example
A company with 100 million shares trading at $50 has a market cap of $5 billion.
Why it matters
Investors group companies into large, mid and small caps. Large caps are usually more stable, while small caps can grow faster and be riskier. The exact boundaries vary by index provider.
Common mistakes
- Treating a large market cap as proof of a good investment. It measures size, not value.
- Comparing share prices instead of market caps. A $500 share can be in a smaller company than a $50 one.
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