, is the market value of apublicly traded companyoutstanding shares.
Market capitalization is equal to theshare pricemultiplied by the number of shares outstanding.23As outstandingstockis bought and sold in public markets, capitalization could be used as anindicatorof public opinion of a companysnet worthand is a determining factor in some forms ofstock valuation.
Market cap reflects only theequityvalue of acompany. A firms choice of capital structure has a significant impact on how the total value of a company is allocated between equity and debt. A more comprehensive measure isenterprise value(EV), which gives effect to outstanding debt, preferred stock, and other factors. For insurance firms, a value called theembedded value(EV) has been used.
Market capitalization is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures. It is also used in ranking the relative size ofstock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. In performing such rankings, the market capitalizations are calculated at some significant date, such as June 30 or December 31.
The total capitalization ofstock marketsoreconomic regionsmay be compared with othereconomic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2trillionin January 20074and rose as high as US$57.5 trillion in May 20085before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008.5In 2014 and 2015, global market capitalization was US$68 trillion and US$67 trillion, respectively.6
For example, if a company has 4 million shares outstanding and the closing price per share is $20, its market capitalization is then $80 million. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million. This is in contrast to mercantile pricing where purchase price, average price and sale price may differ due to transaction costs.
Not all of the outstanding shares trade on the open market. The number of shares trading on the open market is called the float. It is equal to or less thanNbecauseNincludes shares that are restricted from trading. Thefree-float market capuses just the floating number of shares in the calculation, generally resulting in a smaller number.
Traditionally, companies were divided intolarge-cap,mid-cap, andsmall-cap.2The termsmega-capandmicro-caphave also since come into common use,78andnano-capis sometimes heard. Different numbers are used by different indexes;9there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than innominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and market caps are likely to be different country to country.
List of corporations by market capitalization
. World Federation of Exchanges. Archived fromthe original
Global stock values top $50 trln: industry dataReuters)
October 8, 2008, at theWayback MachineWorld Federation of Exchanges)
WFE Full Year Statistics 2015World Federation of Exchanges)
How to Value Assets from the Washington State (U.S.) government web site
Year-end market capitalization by country World Bank, 19882010
This page was last edited on 12 September 2019, at 18:04