What is the standard calculation used to determine a public company’s market capitalization?

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

For example, if a company has 10 billion shares and each share trades at $50, its market capitalization is $500 billion. The figure represents the market value of the company’s outstanding equity at that moment, not the amount of cash in its bank accounts.

Market capitalization is commonly used to compare companies of different sizes. Rankings often divide companies into mega-cap, large-cap, mid-cap, small-cap, and micro-cap groups, although the exact boundaries vary between financial organizations.

Market cap should not be confused with enterprise value. Enterprise value also considers debt, cash, and other claims on the business. Likewise, a company’s market cap is not the same as its annual revenue or accounting book value. Because share prices move throughout the trading day, market-cap rankings can change rapidly.