If you’re familiar with or play in the financial world, you must have heard about market capitalization severally. Market cap is used in the financial market such as Stocks and Cryptocurrency markets.
In this post, we’ll learn about the market cap in the financial market. Let’s get right into it.
7 Things to Know About Market Capitalization
1. Market capitalization, sometimes referred to as a market cap, is the total value of a publicly traded company’s outstanding common shares owned by stockholders.
2. It is equal to the market price per common share multiplied by the number of common shares outstanding.
3. Since outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company’s net worth and is a determining factor in some forms of stock valuation.
4. It is sometimes used to rank the size of companies. It measures only the equity component of a company’s capital structure and does not reflect management’s decision as to how much debt (or leverage) is used to finance the firm.
5. It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange.
6. Market cap is given by the formula MC=NxP, where MC is the market capitalization, N is the number of common shares outstanding, and P is the market price per common share.
7. Companies are divided by their size into large-cap, mid-cap, and small-cap. There are also mega-cap, micro-cap, and nano-cap.
Here is the market cap of some of the world’s largest companies and assets today. Gold ($13.28T), Apple ($2.7T), Microsoft ($2.3T), Google ($1.4T), Amazon ($1.1T), Tesla ($529B), and Bitcoin ($523B).
Closing Thoughts
It is very important for investors and stakeholders in the financial world to understand market capitalization. It allows potential investors to understand the true value of companies and the size of one company in relation to another.
It also helps investors to predict the future performance of the stock of a company because it reflects what the market is willing to pay for the stock.