What is market capitalization?

Definition

Market capitalization (aka “market cap”) is one way to measure the size of a company by multiplying its total number of shares by its stock price.

Understanding market capitalization

Market capitalization shows the dollar value of a company’s outstanding shares. To get this number, you multiply the company’s total number of shares by the price of each share. As the price of the stock changes (or the number of shares outstanding changes), so will the company’s market cap. Companies can be sorted into three market cap categories: “small cap” ( $300M–$2B), “mid cap” ($2B–$10B), and “large cap” ($10B+).

Example

Apple became the first company in history to reach a $1 trillion market cap on August 2, 2018. Doing the math: Its nearly 5 billion shares * the $207.05 share price it hit that day = $1 trillion. Since then, Amazon and Microsoft have also joined the “four comma club.”

Gist

To quickly compute the value of the fruit, you would multiply the number of oranges by their price. For instance, 300 oranges * $2 = $600. Keep in mind, the number of oranges (and their price) could change.