Published on August 28th, 2021
Market cap—or market capitalization—refers to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a market cap of $1 billion.
Why is market capitalization such an important concept? It allows investors to understand the relative size of one company versus another.
Market cap measures what a company is worth on the open market, as well as the market’s perception of its future prospects, because it reflects what investors are willing to pay for its stock.