How to Calculate Market Capitalization

Market capitalization is simply the total worth of a company as determined by the stock market. It is simply the value of the total number of outstanding shares of stock multiplied by the current share price. In cases where a single dominant shareholder owns a large portion of stock, most major stock market indexes use the publicly traded portion of the stock, or "stock float," to determine market capitalization. Market capitalization is an important factor when calculating expected prices to pay for a takeover or buyout. It is also important in ranking companies within an index, as most indexes are weighted by market capitalization.

Instructions

1. Determine the number of shares a company has issued in the stock market. You can get this information from company SEC filings, recent annual reports, or from investing websites such as Morningstar.com, though not all companies issue shares publicly.

2. Determine the most recent stock price. You can get this information by looking the company up on a stock exchange website, or via financial websites like Morningstar.com or Yahoo! Finance.

3. Multiply the two numbers together. The result is the total market capitalization of the company.

Tips & Warnings

• Most financial websites perform the market capitalization calculation for you.

References

• Morningstar: Average Market Capitalizaton
• Stock-Market-Investor.com: Company Market Capitalization
• Moneychimp.com: Market Capitalization

Resources

• Morningstar
• The Options Guide: Capitalization Weightings Explained