The measure called market capitalization is a public company’s share price multiplied by its outstanding shares.
Market capitalization, often shortened to market cap, estimates the total equity value that the stock market assigns to a company. If a business has 1 billion shares priced at $50 each, its market capitalization is $50 billion.
Market cap differs from enterprise value, which also considers debt, cash, and other claims. It also differs from revenue, which is the money a company earns, and book value, which is based on accounting records. These measures can tell very different stories about the same business.
Rankings of the world’s largest companies by market cap change whenever share prices move, even if the companies release no new products or financial results. Share buybacks, new share issues, stock splits, and currency movements can also affect comparisons. Because market cap reflects the value of equity rather than a company’s complete financial structure, analysts often pair it with other measures when comparing businesses.