What is market cap? defined and explained

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What is Market Capitalization?

Market Capitalization (Market Cap) is the most recentmarket value of a company’s outstanding sharesWeighted Average Shares OutstandingWeighted average shares outstanding refers khổng lồ the number of shares of a company calculated after adjusting for changes in the chia sẻ capital over a reporting period. The number of weighted average shares outstanding is used in calculating metrics such as Earnings per Share (EPS) on a company"s financial statements. The Market Cap is equal to lớn the current nói qua price multiplied by the number of shares outstanding.

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The investing community often uses market capitalization value to rank companies and compare their relative sầu sizes in a particular industry or sector. To determine a company’s market cap, simply take its current market giới thiệu pricePar ValuePar Value is the nominal or face value of a bond, or stock, or coupon as indicated on a bond or stoông chồng certificate. It is a static value và multiply the figure by the total number of shares outstanding.

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Market Capitalization Sample Calculation

Market Capitalization Categories

Broadly speaking, based on market capitalization, the stoông xã market classifies stocks into various categories:

Large Cap – Companies with a market cap above $10 billion are classified as large-cap stocks. Some examples would be Apple, Microsoft, IBM, Facebook, etc.Mid Cap – Companies whose market cap ranges from $1 billion khổng lồ $10 billion. Mid-cap stocks, in general, are more volatile than large-cap stocks và consist more of growth-oriented stocks.Micro CapThey are the penny stocks that are relatively young. The micro-cap companies’ potential for growth and decline are of similar nature. They are not considered to be the safest investment. Hence, they require lots of research before investment.

The table below shows the Market Capitalization of selected companies as of May 2021:

Name of the CompanySectorMarket Cap (Bn)
Apple Inc.IT$2,080.8
Alphabet Inc.IT$1,534.3
Facebook Inc.IT$889.2
Microsoft Corp.

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IT$1,831.1
Amazon.comConsumer Discretionary$1,629.9
Walmart Inc.Consumer Staples$399.3
JP.. Morgan Chase & Co.Financials$487.7
Goldman Sachs GroupFinancials$121.8
Nike Inc.Footwear$210.1
AT&T Inc.Telecom$206.8
US Cellular Corp.Telecom$3.2

Investors can use a company’s classification & actual market capitalization value to lớn make smart investment decisions. Generally, large-cap companies own more capital và assets than small-cap companies, và as such, are considered lower-risk investments than small-cap ones. Moreover, small-cap companies tkết thúc khổng lồ show higher growth potential than their larger counterparts và, as such, are likely to lớn provide investors with more opportunities for capital gains.

Equity Value Metric

It’s important lớn know that a company’s market capitalization is the total value of its equity only. A company’s Enterprise ValueEnterprise Value (EV)Enterprise Value, or Firm Value, is the entire value of a firm equal lớn its equity value, plus net debt, plus any minority interest is the value of the entire business, including both equity & debt capital.

A simple example of the difference between equity value vs enterpriseEnterprise Value vs Equity ValueEnterprise value vs equity value. This guide explains the difference between the enterprise value (firm value) & the equity value of a business. value is with a house. If a house is worth $1,000,000 and has a $700,000 mortgage, the equity value is $300,000. The same applies khổng lồ a business. A company with a Market Cap (equity value) of $10 billion và debt of $5 billion has an Enterprise Value of $15 billion.

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Learn more about enterprise value vs equity valueEnterprise Value vs Equity ValueEnterprise value vs equity value. This guide explains the difference between the enterprise value (firm value) and the equity value of a business..

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