Market capitalization, or market cap for short, is a metric that can be used to measure how large a company is and how well they are performing. The higher the market cap of a company the more valuable it is, which also makes it a great metric for comparing company size and success across industries and sectors.
Market cap is a rather simple metric to calculate. It requires only two variables: outstanding shares and price per share. You simply multiply the two values together and that resulting number is the market cap of the company.
When you hit calculate you will get a single number as a result. This number represents the total value of a company, the higher the number the more valuable it is.
Since the formula for calculating market cap is rather simple, using this tool is also very simple. The steps involved include:
Let's say you are reviewing a company and want to see how valuable it is. It has a total of 75,000,000 outstanding shares at a price of $6.25 per share. To get the market cap we do the following: 75,000,000 x 6.25 to get a total market cap of $468,750,000.
Yes, the higher the market cap of a company the more it is worth and valued at which is better.
A higher market cap does not mean that the stock price is higher. Let's say there are two companies with a market cap of $50 million. Company one has 1 million outstanding shares so their share price is $50 per share. Company two has 50 million outstanding shares so their share price is $1 per share. With this said, you can see why market cap is not indicative of share price.
A company's market cap is not the amount of money they have in liquid or assets, it is a completely different metric.
Market cap is not revenue, it is the result of multiplying outstanding shares and share price of a company.
Create Date: October 13, 2024
Last Modified Date: October 14, 2024
