Market capitalization, or market cap refers to how much a company is worth as determined by the stock market.
Market cap measures what a company is worth on the open market, as well as the market’s perception of its future prospects, because it reflects what investors are willing to pay for its stock.
Formula to calculate market capitalization.
Market capitalization is equal to the share price multiplied by the number of shares outstanding.
Example:
Company A has a total of 40,000,000 shares outstanding. Suppose the current share price is $ 10. Determine the market capitalization.
Thus, the market cap is $400 million.
