What Is Market Capitalization?
Market capitalization — often shortened to market cap — is the total dollar value of a company’s outstanding shares of stock. It is one of the most widely used metrics to gauge a company’s size and investment risk.
How Is Market Cap Calculated?
The formula is straightforward:
Market Cap = Share Price × Total Shares Outstanding
For example, if a company has 10 million shares outstanding and each share trades at $50, the market cap is $500 million.
Market Cap Categories
- Mega-cap: Over $200 billion
- Large-cap: $10 billion–$200 billion
- Mid-cap: $2 billion–$10 billion
- Small-cap: $300 million–$2 billion
- Micro-cap: Under $300 million
Why It Matters
Market cap helps investors compare companies, assess relative risk, and understand the composition of indices like the S&P 500. Larger companies tend to be more stable; smaller ones may offer higher growth potential alongside higher risk.
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