العربية
中国
Français
Deutsch
Ελληνική
हिन्दी
Italiano
日本語
Português
Русский
EspañolMARKET CAPITALIZATION
'Market capitalization', or 'market cap', is a measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company. As owning stock represents owning the company, including all its assets, capitalization represents the public opinion of a company's net worth and is a determining factor in stock valuation. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators. The global market capitalization was $51.225 trillion in March 2007 [1], indicating a dominant force in the global economy.
Market capitalization represents the public consensus on the value of a company. A corporation, including all of its assets, may be freely bought and sold through purchases and sales of stock, which will determine the price of the company's shares. Its market capitalization is this share price multiplied by the number of shares in issue, providing a total value for the company's shares and thus for the company as a whole.
Many companies have a dominant shareholder, typically a government or a family. Most stockmarket indices (DOW, S&P500, BSE, FTSE, DAX, Nikkei, MSCI) adjust for these by working on a "free float" basis, ie the market cap is the value of the publicly tradable part of the company.
Note that market capitalization is a market estimate of a company's value, based on perceived future prospects, economic and monetary conditions, and therefore largely independent of a company's history. Stock prices can also be moved by speculation about changes in expectations about profits or about mergers and acquisitions.
It is possible for stock markets to get caught up in an economic bubble, like the "dotcom mania", and excess speculation, like any asset class such as gold or real estate. In such events, it is normal for companies to become valued on past momentum extrapolated into the future plus justified by a convincing story as well as success, until it goes wrong and the world mean-reverts, causing significant losses. Conversely, stock markets will usually be the primary transmission mechanism for most of the pleasant surprises that occur in the world's economy.
'Capitalized value' is a synonymous phrase of ''market capitalization''.
Smaller companies tend to be riskier investments and have higher growth potential. The order of magnitude of the capitalization may be used as investor's shorthand for the associated risk, and serves as a handy way to classify companies in general:
★ 'Micro-Cap': capitalization below $250 million.
★ 'Small-Cap': capitalization between approximately $250 million and $1 billion
★ 'Mid-Cap': capitalization between approximately $1 billion and $10 billion
★ 'Large-Cap' or blue chip: capitalization over approximately $10 billion
★ Financial ratio
★ Fundamental analysis
★ Growth stock
★ Market price
★ Market trends
★ Technical analysis
★ List of finance topics
★ List of corporations by market capitalization
1. Global stock values top trln: industry data (Reuters)
★ How to Value Assets - from the Washington State (U.S.) government web site
| Contents |
| Valuation |
| Categorization of companies by capitalization |
| See also |
| References |
| External links |
Valuation
Stock market capitalization in 2005
Market capitalization represents the public consensus on the value of a company. A corporation, including all of its assets, may be freely bought and sold through purchases and sales of stock, which will determine the price of the company's shares. Its market capitalization is this share price multiplied by the number of shares in issue, providing a total value for the company's shares and thus for the company as a whole.
Many companies have a dominant shareholder, typically a government or a family. Most stockmarket indices (DOW, S&P500, BSE, FTSE, DAX, Nikkei, MSCI) adjust for these by working on a "free float" basis, ie the market cap is the value of the publicly tradable part of the company.
Note that market capitalization is a market estimate of a company's value, based on perceived future prospects, economic and monetary conditions, and therefore largely independent of a company's history. Stock prices can also be moved by speculation about changes in expectations about profits or about mergers and acquisitions.
It is possible for stock markets to get caught up in an economic bubble, like the "dotcom mania", and excess speculation, like any asset class such as gold or real estate. In such events, it is normal for companies to become valued on past momentum extrapolated into the future plus justified by a convincing story as well as success, until it goes wrong and the world mean-reverts, causing significant losses. Conversely, stock markets will usually be the primary transmission mechanism for most of the pleasant surprises that occur in the world's economy.
'Capitalized value' is a synonymous phrase of ''market capitalization''.
Categorization of companies by capitalization
Smaller companies tend to be riskier investments and have higher growth potential. The order of magnitude of the capitalization may be used as investor's shorthand for the associated risk, and serves as a handy way to classify companies in general:
★ 'Micro-Cap': capitalization below $250 million.
★ 'Small-Cap': capitalization between approximately $250 million and $1 billion
★ 'Mid-Cap': capitalization between approximately $1 billion and $10 billion
★ 'Large-Cap' or blue chip: capitalization over approximately $10 billion
See also
★ Financial ratio
★ Fundamental analysis
★ Growth stock
★ Market price
★ Market trends
★ Technical analysis
★ List of finance topics
★ List of corporations by market capitalization
References
1. Global stock values top trln: industry data (Reuters)
External links
★ How to Value Assets - from the Washington State (U.S.) government web site
This article provided by Wikipedia. To edit the contents of this article, click here for original source.
psst.. try this: add to faves
