investing guide

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

Category Capitalization
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.