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Capitalization

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The market capitalization (market cap) of a company is the stock price multiplied by the number of shares outstanding. Capitalization represents the theoretical price at which one could purchase the entire company. This is only an estimate, however, as a purchase of that size would almost certainly distort the market price. Stocks are divided into classes based on their capitalization. While there is no hard and fast rule, small capitalization (small-cap) companies have market caps between $0.5-$2 billion. Mid-caps are larger than small-caps, but usually have a capitalization between $2-10 billion. Large-caps have a capitalization of over $10 billion. Many large-caps are also blue chip stocks. Mega-caps are companies with a capitalization in the hundreds of billions. Capitalization can also refer to the sum of a corporation's stock, long-term debt and retained earnings. Which sense of the word is being used must be determined from context.



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