Capitalization

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Financial Terms and Glossary

Capitalization

Capitalization refers to the total value of a company's outstanding shares of stock, representing the company's overall market value or size. It is calculated by multiplying the number of outstanding shares by the current market price per share. Capitalization is often categorized into small-cap, mid-cap, and large-cap companies, depending on their total market value. The term can also refer to how a company finances its operations, either through debt, equity, or a combination of both.

Example

If a company has 10 million shares outstanding, and its stock is trading at $50 per share, its market capitalization would be $500 million, classifying it as a mid-cap company.

Key points

• Capitalization refers to a company’s total market value, calculated by multiplying outstanding shares by the stock price.

• Companies are categorized as small-cap, mid-cap, or large-cap based on their market value.

• It can also refer to how a company is financed through debt and equity.

Quick Answers to Curious Questions

How is market capitalization calculated?

Market capitalization is calculated by multiplying the total number of outstanding shares by the current stock price.

What does market capitalization indicate?

It indicates the size and market value of a company, helping investors assess its growth potential and risk level.

What are the different categories of capitalization?

Companies are often categorized as small-cap (under $2 billion), mid-cap ($2 billion to $10 billion), and large-cap (over $10 billion) based on their market value.