How to Compute Market Capitalization

There are different ways of computing a public corporation's value. One commonly used financial figure used to cite a company’s worth and to compare companies is market capitalization, frequently shortened to market cap. Market capitalization, expressed in monetary terms, is the current market value of a company.

Instructions

1. Obtain a company’s number of stock shares outstanding. Shares outstanding are those shares issued by the company and purchased by investors. The data can be found on many finance websites. The sites provide a quote search box on their home page. Key in the name of the company or the company’s ticker symbol in the search box. The quote page appearing contains a lot of company data including the number of stock shares outstanding. Websites offering this information free include the Wall Street Journal, MSN Money, Bloomberg and the New York Stock Exchange.

2. Find the current share price of the company stock. This information can be found on the stock quote pages of various financial websites, including The Wall Street Journal, MSN Money and the New York Stock Exchange. Use a price referenced during the trading day or the most recent closing stock price. The latest closing price stock numbers are also printed in many newspapers.

3. Calculate market capitalization. The formula is: stock price times the number of shares outstanding. The resulting number is the company’s market value on that particular day. Public companies are grouped into market capitalization categories by mutual fund companies, rating firms, analysts and investors. Different organizations define the categories slightly differently, but the definitions do not vary greatly. Large cap companies typically have a market capitalization of $5 billion or greater. Midcap companies range in value between $750 million and $5 billion. The market value of small-cap companies extends from $150 million to $750 million. Microcap companies are worth less than $150 million. Determine which category a particular company fits in and compare similar size companies.

Tips & Warnings

• Some financial websites provide current market captalization data -- no calculations necessary.

• Market capitalization numbers can vary greatly when the stock market is in flux. A lot of volatility in the stock price results in a wide range in a company's market capitalization value.

References

• Morningstar: Measuring Market Capitalization
• Bankrate.com: What in the World is a Market Cap?

Resources

• Stanford University; Cardinal Money Management—Market Cap
• Huffington Post; Apple Dethrones Microsoft as World’s Biggest Tech Company; October 26, 2010
• Wall Street Survivor: What is Market Capitalization?; February 1, 2009
• CNBC: Video - Market Capitalization—CNBC Explains; Salman Khan; June 16, 2011
• The Wall Street Journal
• MSN Money:
• Bloomberg
• NYSE Euronext