Market Cap Definition

Market cap is short for market capitalization, a measure of a company's outstanding shares' complete dollar market value. This value is the product of one share's current market value and the company's total outstanding shares, according to Investopedia.

Function

If a company has 1,000,000 outstanding shares that are individually priced at $50 per share according to the current market value, then the company's market cap will be $50,000,000.

Identification

Market cap is described as a stock or company's aggregate or sum value.

Types

According to Investopedia, there are three categories of the market cap. Large cap is for companies with over $10 billion in stocks. Medium cap is equivalent to between $2 billion and $10 billion in stocks, and small cap is used for companies with less than $2 billion in stocks.

Warning

Market cap is a temporary description of a company's value because it is based on the ever-fluctuating current stock market. In fact, it may not even accurately reflect a company's true value, according to PCMAG.com.

Considerations

Flourishing companies may reflect a low market cap, while new or struggling companies may encounter a temporary business spike that reflects a high market cap.

References

• Market Capitalization
• Market Cap
• Investopedia: Market Capitalization