Market Capitalization

Market capitalization is the number of shares outstanding times the stock price. In other words, market capitalization is the dollar value of all outstanding shares. Market capitalization almost always differs markedly from a company's net worth -- its nominal value -- because market capitalization is what investors are actually willing to pay for the company. Stocks are often classified by the size of their market capitalization. Companies with a market capitalization of several billion dollars or more may be considered large-cap stocks; those with a market capitalization of several hundred million to a few billion are mid-cap stocks; and those of a few hundred million or less are small-cap stocks. As a general (but by no means fixed) rule, a stock with a large market capitalization will be less subject to sharp swings in stock price, but may offer fewer opportunities for price appreciation. Note that the term market cap is widely used as shorthand for market capitalization.