Market capitalization is equal to the market price per common share multiplied by the number of common shares outstanding.[3][4][5] Since outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation.
Market capitalization is sometimes used to rank the size of companies. It measures only the equity component of a company's capital structure, and does not reflect management's decision as to how much debt (or leverage) is used to finance the firm. A more comprehensive measure of a firm's size is enterprise value (EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called the embedded value (EV) has been used.
It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. The total capitalization of stock markets or economic regions may be compared with other economic indicators (e.g. the Buffett indicator). The total market capitalization of all publicly traded companies in 2020 was approximately US$93 trillion.[6]
Historical estimates of world market cap
Total market capitalization of all publicly traded companies in the world from 1975 to 2020.[6]
Market cap is given by the formula , where MC is the market capitalization, N is the number of common shares outstanding, and P is the market price per common share.[7]
For example, if a company has 4 million common shares outstanding and the closing price per share is $20, its market capitalization is then $80 million. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million. This is in contrast to mercantile pricing where purchase price, average price and sale price may differ due to transaction costs.
Not all of the outstanding shares trade on the open market. The number of shares trading on the open market is called the float. It is equal to or less than N because N includes shares that are restricted from trading. The free-float market cap uses just the floating number of shares in the calculation, generally resulting in a smaller number.
Market cap terms
Traditionally, companies were divided into large-cap, mid-cap, and small-cap.[8][4] The terms mega-cap and micro-cap have also since come into common use,[9][10] and nano-cap is sometimes heard. Different numbers are used by different indexes;[11] there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and market caps are likely to be different country to country.
Cryptocurrencies
The term market capitalization has also been applied to cryptocurrencies in recent years.[12][13] Unlike the money supply of a fiat currency, a cryptocurrency market cap is denominated in some other currency.
^(PDF). World Federation of Exchanges. Archived from the original (PDF) on July 22, 2013. Retrieved May 29, 2013.
^Graham, John R; Smart, Scott B.; and Megginson, William J. (2010). Corporate Finance (third ed.). Mason OH: South-Western Cengage Learning. p. 387. ISBN9780324782967.{{cite book}}: CS1 maint: multiple names: authors list (link)
^. Archived from the original on October 1, 2020. Retrieved August 3, 2008.
^Popper, Nathaniel (September 12, 2018). "When Cryptocurrencies Fluctuate, He Uses These Tech Tools to Keep Track". The New York Times. Retrieved August 13, 2021.
^Vigna, Paul (January 23, 2018). "The Programmer at the Center of a $100 Billion Crypto Storm". wsj.com. Wall Street Journal. Retrieved August 13, 2021.
External links
Look up market capitalization in Wiktionary, the free dictionary.
How to Value Assets – from the Washington State (U.S.) government web site
Year-end market capitalization by country – World Bank, 1988–2018
March 29, 2023
market, capitalization, sometimes, referred, market, total, value, publicly, traded, company, outstanding, common, shares, owned, stockholders, york, stock, exchange, wall, street, world, largest, stock, exchange, terms, total, market, capitalization, listed, . Market capitalization sometimes referred to as market cap is the total value of a publicly traded company s outstanding common shares owned by stockholders 2 The New York Stock Exchange on Wall Street the world s largest stock exchange in terms of total market capitalization of its listed companies 1 Market capitalization is equal to the market price per common share multiplied by the number of common shares outstanding 3 4 5 Since outstanding stock is bought and sold in public markets capitalization could be used as an indicator of public opinion of a company s net worth and is a determining factor in some forms of stock valuation Contents 1 Description 1 1 Historical estimates of world market cap 2 Calculation 3 Market cap terms 4 Cryptocurrencies 5 See also 6 References 7 External linksDescription EditMarket capitalization is sometimes used to rank the size of companies It measures only the equity component of a company s capital structure and does not reflect management s decision as to how much debt or leverage is used to finance the firm A more comprehensive measure of a firm s size is enterprise value EV which gives effect to outstanding debt preferred stock and other factors For insurance firms a value called the embedded value EV has been used It is also used in ranking the relative size of stock exchanges being a measure of the sum of the market capitalizations of all companies listed on each stock exchange The total capitalization of stock markets or economic regions may be compared with other economic indicators e g the Buffett indicator The total market capitalization of all publicly traded companies in 2020 was approximately US 93 trillion 6 Historical estimates of world market cap Edit Total market capitalization of all publicly traded companies in the world from 1975 to 2020 6 Year World market cap in mil US World market cap of GDP Number of listedcompanies1975 1 149 245 27 2 14 5771980 2 525 736 29 6 17 2731985 4 684 978 47 0 20 5551990 9 519 107 50 8 23 7321991 11 340 785 56 8 24 6661992 10 819 256 50 2 24 9471993 13 897 390 61 7 28 3001994 14 639 924 60 9 30 2901995 17 263 728 64 0 33 3791996 19 806 691 72 3 35 6171997 22 029 761 80 7 36 9461998 24 555 201 89 6 37 9281999 33 181 159 115 1 38 4142000 30 925 434 101 1 39 8922001 26 792 162 88 4 40 1572002 22 802 792 72 7 38 8942003 31 107 425 84 9 41 0512004 36 540 980 89 2 38 7242005 40 512 446 92 6 39 0962006 50 074 966 106 1 43 1042007 60 456 082 114 0 44 0342008 32 418 516 56 2 43 9492009 47 471 293 83 8 42 6692010 54 259 518 87 3 43 4272011 47 521 341 68 8 44 3232012 54 503 237 78 4 43 7722013 64 367 842 89 0 44 8532014 67 177 254 90 3 45 7432015 62 268 184 94 5 43 9832016 65 117 714 97 1 43 8062017 79 501 948 111 1 43 4402018 68 893 044 91 9 43 5542019 78 825 583 108 4 43 2482020 93 686 226 134 7Calculation EditMarket cap is given by the formula MC N P textstyle text MC N times P where MC is the market capitalization N is the number of common shares outstanding and P is the market price per common share 7 For example if a company has 4 million common shares outstanding and the closing price per share is 20 its market capitalization is then 80 million If the closing price per share rises to 21 the market cap becomes 84 million If it drops to 19 per share the market cap falls to 76 million This is in contrast to mercantile pricing where purchase price average price and sale price may differ due to transaction costs Not all of the outstanding shares trade on the open market The number of shares trading on the open market is called the float It is equal to or less than N because N includes shares that are restricted from trading The free float market cap uses just the floating number of shares in the calculation generally resulting in a smaller number Market cap terms EditTraditionally companies were divided into large cap mid cap and small cap 8 4 The terms mega cap and micro cap have also since come into common use 9 10 and nano cap is sometimes heard Different numbers are used by different indexes 11 there is no official definition of or full consensus agreement about the exact cutoff values The cutoffs may be defined as percentiles rather than in nominal dollars The definitions expressed in nominal dollars need to be adjusted over decades due to inflation population change and overall market valuation for example 1 billion was a large market cap in 1950 but it is not very large now and market caps are likely to be different country to country Cryptocurrencies EditThe term market capitalization has also been applied to cryptocurrencies in recent years 12 13 Unlike the money supply of a fiat currency a cryptocurrency market cap is denominated in some other currency See also EditList of public corporations by market capitalization List of countries by stock market capitalization Market price Authorised capital Treasury stockReferences Edit Market highlights for first half year 2010 PDF World Federation of Exchanges Archived from the original PDF on July 22 2013 Retrieved May 29 2013 Graham John R Smart Scott B and Megginson William J 2010 Corporate Finance third ed Mason OH South Western Cengage Learning p 387 ISBN 9780324782967 a href Template Cite book html title Template Cite book cite book a CS1 maint multiple names authors list link Graham Smart and Megginson op cit p 387 a b Market Capitalization Definition Retrieved April 2 2013 Financial Times Lexicon Archived from the original on September 25 2016 Retrieved February 19 2013 a b Market capitalization of listed domestic companies current US Data Data WorldBank org Retrieved September 20 2021 Graham Smart and Megginson op cit p 387 Large Cap Mid Cap and Small Cap Stocks Financial Edge Retrieved September 15 2022 Mega Cap Definition Retrieved April 2 2013 Micro Cap Definition Retrieved April 2 2013 Definition of Market Capitalization Archived from the original on October 1 2020 Retrieved August 3 2008 Popper Nathaniel September 12 2018 When Cryptocurrencies Fluctuate He Uses These Tech Tools to Keep Track The New York Times Retrieved August 13 2021 Vigna Paul January 23 2018 The Programmer at the Center of a 100 Billion Crypto Storm wsj com Wall Street Journal Retrieved August 13 2021 External links Edit Look up market capitalization in Wiktionary the free dictionary How to Value Assets from the Washington State U S government web site Year end market capitalization by country World Bank 1988 2018 Retrieved from https en wikipedia org w index php title Market capitalization amp oldid 1145220181, wikipedia, wiki, book, books, library,
