What is Market Capitalization?
Market capitalization, also known as “market cap”, is a measure of the total value of the market value of a security. The market capitalization can be calculated by multiplying the current stock price by the total number of that security exist.
Normally, market capitalization can be found when someone measure of the total value of securities like a company’s outstanding shares of stock and cryptocurrency total value.
The formula for calculating market capitalization is:
Market Capitalization = Current Price x Total Volume of the Securities
For example, if a company has 80 million outstanding shares of stock and the current stock price is $50, the market capitalization would be:
Market Capitalization = $50 x 80,000,000 = $4,000,000,000
Therefore, the market capitalization of the company would be $500 billion.
What does Market Capitalization Tell Us?
Market capitalization is an important metric used by investors to evaluate the size and performance of an asset or a company.
It is also used as a benchmark to compare companies within the same industry or sector. Companies with a higher market capitalization are generally considered to be larger and more established than those with a lower market capitalization.
Market capitalization can be divided by its size, including:
- Large-cap: Companies with a market capitalization of over $10 billion
- Mid-cap: Companies with a market capitalization between $2 billion and $10 billion
- Small-cap: Companies with a market capitalization between $300 million and $2 billion
- Micro-cap: Companies with a market capitalization under $300 million
It’s important to note that market capitalization is not always an accurate representation of a company’s value or potential for growth, as it is influenced by factors such as stock price, outstanding shares, and market trends.
Therefore, it should be used in conjunction with other metrics when making investment decisions.
