Market capitalization, or market cap, is the market value of a company’s outstanding shares. This number is calculated by taking the stock price and multiplying it by the total number of shares outstanding.
Market capitalization (market cap) is the market value at a point in time of the shares outstanding of a publicly traded company, being equal to the share price at that point of time times the number of shares outstanding. As outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation.
Market capitalization is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures. It is also used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange. (See List of stock exchanges.) In performing such rankings, the market capitalizations are calculated at some significant date, such as 30 June or 31 December.
The total capitalization of stock markets or economic regions may be compared to other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007 and rose as high as US$57.5 trillion in May 2008 before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008.