Market Cap (Market Capitalization)

Market Cap (Market Capitalization)

What It Is

Market Capitalization (Market Cap) represents the total dollar market value of a company's outstanding shares of stock.

Formula

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Market Cap = Current Stock Price × Total Outstanding Shares

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Market Cap Categories

• Large-Cap: Over $10 billion (stable, established companies)
• Mid-Cap: $2-10 billion (growth potential, moderate risk)
• Small-Cap: $300 million - $2 billion (higher growth, higher risk)
• Micro-Cap: Under $300 million (very risky, volatile)

Example

If a company has 100 million shares outstanding and the stock price is $50:

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Market Cap = 100M shares × $50 = $5 billion (Mid-Cap)

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Why It Matters

• Indicates company size and stability
• Affects index inclusion (S&P 500, Russell 2000)
• Influences risk/return profile
• Determines institutional ownership eligibility

Investment Considerations

• Large-caps: Lower risk, steady dividends
• Small-caps: Higher growth potential, more volatile
• Diversify across market caps for balanced portfolio