It is calculated by multiplying the number of outstanding sharesWhat are value stocks? A value company is a company that app... More by the share priceWhat are value stocks? A value company is a company that app... More and is thus a strong indicator of a company’s . Market cap is generally expressed in but in Europe may be recorded in or sterling.
As an example, a company that has 50 million shares with a share value of $75 would have a market cap of $3.75 billion (50 million x $75).
The total (also: outstanding) shares include not just the but also preferred shares, which are not usually traded on the .
Many online brokers offer the option to trade the stocks and sharesWhat is the difference between stocks and shares? The stock... More of public companies:
Why the market capitalisation in trading matters
Market capitalisation is not the only indicator of a company’s value, but it is an important one as it’s a fairly solid calculation of the size of its , and this may be viewed as a sign of its success as a company.
It should not be taken as the sole indicator of company’s health, as many factors can affect a company’s growth, some of which will be outside the control of the company or .
On the trading floor, companies are rated according to the size of their market capitalisation, which determines which indices they may be listed on. The amounts for listing are usually:
- Large-cap companies have equityWhat is equity? In accounting and finance, equity is the r... More of at least $10 billion
- Mid-cap companies have equity of $2-10 billion
- Small cap companies have equity of less than $2 billion
Cap size, therefore, matters when considering in or trading shares as it can depict how a company has allocated its assets and also help calculate the risk/reward ratio.
