Market Cap

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Description of Market Cap. Explanation.

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Definition Market Cap. Description.


Market Cap is a business term that refers to the aggregate value of a firm's outstanding common shares. In essence, market capitalization reflects the total value of a firm's equity currently available on the market. This measure differs from equity value to the extent that a firm has outstanding stock options or other securities convertible to common shares. Market capitalization is calculated by multiplying the number of outstanding common shares of the firm and the current price of those shares .


Although frequently calculated and stated as a measure of the size of a company it is important to note that it is not necessarily a realistic estimate of the value of the business as an entity. It may fluctuate widely from day to day and, because it is based on trading in a small proportion of the company’s shares, does not necessarily represent what a purchaser of the entire company would have to pay for it. Market capitalization may also increase or decrease for reasons unrelated to performance such as acquisitions, divestitures and stock repurchases.


Market Cap Forum
  Market Cap Calculation Example
A firm reports a book value of shareholders' equity of $850 million with 25 million of shares outstanding. Those shares are traded at $45 each in the stock market. An analyst values the equity by following the scheme: Value = book value + extra value...
     
 

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Compare also: Market Value Added  |  Treasury Stock

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