Market capitalization, or market cap, is simply the measurement of a company’s total value or worth. If a company wants to buy out another company, they are going to be paying the market cap for it.
Calculating Market Cap
To calculate the market cap, all you simply have to do is take the total number of outstanding shares, then multiply that number by the current share price. Let’s look at Exxon Mobil (XOM) for example:
Total Shares = 5.63 Billion
Today’s Close = $79.82
Market Cap = $449.63 Billion (5.63 x 79.82)
Why does the market cap matter at all? Well, when investing in the stock market, it is typically recommended you diversify your holdings amongst multiple sized companies. Ever heard of “small cap”, “mid cap”, and “large cap”? Those are direct references to simply the size of the company you are investing in.
Types of Market Cap
There are several different caps used on a day to day basis, and for educational and reference purposes I will relay them for ya!
Nano Cap = Under $50 Million
Micro Cap = $50 Million to $300 Million
Small Cap = $300 Million to $2 Billion
Mid Cap = $2 Billion to $10 Billion
Large Cap = $10 Billion to $200 Billion
Mega Cap = $200 Billion or greater
Finding Market Cap
To find out what the market capitalization of a company is, I simply use yahoo finance because yahoo rocks. To find it through yahoo finance, simply type in the ticker, hit enter and in the middle column to the left of the chart you will find Market Cap. Here is screenshot just taken:
(If you enjoyed this post, or just investor education in general, stay up to date by subscribing to the feed! Google reader is most popular just so ya know. Also check out the education archives for more great reads.)