What does market capitalization measure for a publicly traded company such as Apple or Microsoft?

Market capitalization measures a publicly traded company’s share price multiplied by its shares outstanding.

The formula gives the market value of the company’s equity: current share price × total shares outstanding. For example, if a company had 10 billion shares priced at $100 each, its market capitalization would be $1 trillion.

Market capitalization is useful for comparing the relative size of listed companies, including Apple, Microsoft, and Saudi Aramco. It is not the same as revenue, profit, assets, or enterprise value. Enterprise value also considers debt and cash, while market capitalization focuses on the value of shareholders’ equity.

The figure changes whenever the share price moves. It can also change when a company issues shares, buys back shares, or completes a stock split, although a split by itself normally leaves the total market value unchanged. Rankings based on market cap are therefore snapshots rather than permanent measures of corporate importance.