Understanding Market Capitalization

Market capitalization, or market cap, is simply the measurement of a company's total value or worth. If a company wants to buy out another company, they are going to be paying the market cap for it.

Calculating Market Cap

To calculate the market cap, all you simply have to do is take the total number of outstanding shares, then multiply that number by the current share price. Let's look at Exxon Mobil (XOM) for example:

Total Shares = 5.63 Billion
Today's Close = $79.82

Market Cap = $449.63 Billion (5.63 x 79.82)

Why does the market cap matter at all? Well, when investing in the stock market, it is typically recommended you diversify your holdings amongst multiple sized companies. Ever heard of "small cap", "mid cap", and "large cap"? Those are direct references to simply the size of the company you are investing in.

Types of Market Cap

There are several different caps used on a day to day basis, and for educational and reference purposes I will relay them for ya!

Nano Cap = Under $50 Million
Micro Cap = $50 Million to $300 Million
Small Cap = $300 Million to $2 Billion
Mid Cap = $2 Billion to $10 Billion
Large Cap = $10 Billion to $200 Billion
Mega Cap = $200 Billion or greater

Finding Market Cap

To find out what the market capitalization of a company is, I simply use yahoo finance because yahoo rocks. To find it through yahoo finance, simply type in the ticker, hit enter and in the middle column to the left of the chart you will find Market Cap. Here is screenshot just taken:

xom-yf.jpg

And there you have it, right smack dab in the middle. Do any of the other terms ring a bell to ya? I have covered a few of them here on the blog! Let's see... Volume, Dividend yield, and stock charts.

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Comments

  1. Posted by Lacey on May 2, 2007 at 9:03 pm

    Thanks...I had a friend who wanted an explanation of this. I'll send her the link.

  2. Posted by Blain on May 3, 2007 at 9:55 am

    cool, you are welcome! :mrgreen:

  3. Posted by MillionDollarJourney.com on May 3, 2007 at 10:23 am

    Good educational posts lately Blain, great work.

    FT

  4. Posted by chitown on May 20, 2010 at 11:45 am

    if i may make a suggestion - would not your share price actually be $79.82 DOLLARS and not BILLIONS on the CLOSE number????

    Total Shares = 5.63 Billion
    Today’s Close = 79.82 Billion

    Market Cap = $449.63 Billion (5.63 x 79.82)

  5. Posted by Blain Reinkensmeyer on May 24, 2010 at 8:05 pm

    You are 100% correct, Ive updated the price to $79.82 instead of 79.82 billions. Thank you for writing in!

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