Market Capitalization: A Comprehensive Guide
Understanding Market Cap
Market capitalization, often abbreviated as market cap, is a financial metric that represents the total value of a company's outstanding shares. It is calculated by multiplying the number of shares outstanding by the current market price per share.
Formula for Market Capitalization
Market Cap = Number of Shares Outstanding x Share Price
Example
A company with 20 million shares outstanding, each trading at $100, would have a market cap of $2 billion.
Significance of Market Cap
Market cap provides valuable insights into a company's size and financial health. It is commonly used to:
- Compare companies within the same industry
- Assess investment opportunities
- Track the growth and performance of a company over time
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