Market Capitalization

Market capitalization, or market cap, is the total market value of a company's entire outstanding stock. It's calculated with one simple formula: share price multiplied by the total number of shares outstanding.

A company with a $50 share price and 2 billion shares outstanding has a far larger market cap than a company with a $200 share price but only 10 million shares outstanding. Share price alone tells you almost nothing about a company's actual size.

Market Cap = Share Price x Shares Outstanding

Share price:          $50
Shares outstanding:    2,000,000,000
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Market Cap = $50 x 2,000,000,000 = $100,000,000,000

Market capitalization is calculated as share price multiplied by total shares ____.

Market cap is why companies get grouped into rough size categories, like large-cap, mid-cap, and small-cap — labels that describe overall size and, generally, how much the stock's price tends to swing. Larger companies tend to be more stable and closely watched; smaller companies can be more volatile but also less thoroughly studied by the market.

A company has a $40 share price and 5 billion shares outstanding. What is its market capitalization?

A higher share price always means a company has a larger market capitalization than one with a lower share price.