What calculation defines a public company’s market capitalization?

A public company’s market capitalization is calculated as its share price multiplied by its shares outstanding.

For example, if a company has 1 billion shares and each share trades at $20, its market capitalization is $20 billion. The calculation estimates the total market value of the company’s publicly held equity at that moment.

The figure changes whenever the share price changes. It can also change when a company issues new shares, buys back shares, or completes a stock split, although a split alone normally changes the price and share count proportionally rather than instantly changing the company’s total value.

Market capitalization differs from enterprise value, which also considers debt and cash. It also differs from revenue, profit, book value, and assets. Rankings of the world’s richest companies by market cap therefore compare stock-market equity values.