Market Capitalization

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Market Capitalization

Market capitalization is essentially the market value of a company. It is calculated by multiplying the number of shares outstanding by the current share price. For example, if there are 10 million shares outstanding of ABC Corporation and ABC’s stock is currently trading at $25 per share, the market capitalization of ABC is $250 million. Market capitalization not only gives you an idea concerning the size of a company, but it can also be used when calculating the basic valuation ratios.

Here is the formula for market cap:

Market Capitalization = (Stock Price) x (Shares Outstanding)