Market Capitalization

Market capitalization, often called market cap, shows what the stock market values a company's equity at. If a company has 50 million shares and each trades at 40, its market capitalization is 2 billion.

Market cap changes constantly as the share price moves. It reflects investors' views of the company's future prospects, not its accounting value or book value.

Companies are often grouped by size. Large-cap companies are the biggest and most established, mid-cap companies are medium-sized and small-cap companies are smaller and often riskier but with more room to grow. The exact boundaries vary between markets and index providers.

Market cap is widely used in investing. Many stock indices weight companies by market cap, so larger companies have more influence on the index. However, market cap measures only the value of equity. To see the value of the whole business, including its debt, analysts use enterprise value, which adds debt and subtracts cash.