How Is Market Capitalization Calculated
How is market capitalization calculated?
Market capitalization (market cap) is the term used to describe how large a corporation is.
To figure out a corporations market cap use the following formula:
outstanding shares X the stock price = market cap
|Micro Cap||Less than $250 million|
|Small Cap||$250 million to $1 Billion|
|Mid Cap||$1 Billion to $5 billion|
|Large Cap||More than $5 billion|
Some investors will choose large cap stocks because they feel there is less of a chance they will go bankrupt; which unfortunately is not always true.
On the other side of the spectrum, some investors will choose small cap stocks because there is potentially much more room for growth with small caps than large caps. However, with the greater reward possibility comes the greater risk of a less established company.