What does “market capitalization” measure when ranking the world’s richest public companies?

Market capitalization measures share price times shares outstanding when ranking public companies.

The formula is straightforward: multiply the current price of one share by the total number of shares outstanding. For example, a company with one billion shares priced at US$50 has a market capitalization of US$50 billion. The calculation gives investors a common way to compare the market value of companies with different share counts.

Market capitalization is not the same as revenue, profit, assets, or cash. A company can have enormous sales but a lower market cap than a faster-growing business if investors expect different future earnings. Conversely, a company with modest current profits can receive a high valuation when investors anticipate strong expansion.

Market-cap rankings can change daily because share prices change during trading. They can also change after buybacks, stock issuance, mergers, or stock splits. A stock split changes the number of shares and the per-share price together, so it normally does not change the company’s total market capitalization by itself.