Glossary / Market structure

Market capitalisation

Also called: market cap · market capitalization

Market capitalisation is a company's share price multiplied by its total shares outstanding. It is the market value of the equity — not the value of the whole business, because it excludes debt and excludes cash.

How it is measured

How is market capitalisation measured?

Multiply the current share price by shares outstanding as reported in the most recent filing. A float-adjusted version uses only the tradable shares, which is what most index providers weight by. Enterprise value is the related figure that adds debt and subtracts cash to describe the whole capital structure.

Why it matters

Why does market capitalisation matter to a swing trader?

Size is one of the strongest determinants of how a security behaves: larger companies have more analyst coverage, deeper trading, tighter spreads and smaller typical percentage swings, while smaller ones have the reverse of each. The conventional bands — large, mid, small and micro — are useful shorthand with no official boundaries. The common misreading is treating market cap as what it would cost to acquire the company; that figure is enterprise value.

Related

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Related terms

Float
Float is the number of a company's shares that are actually available to trade in the open market.
Average dollar volume
Average dollar volume is the value traded in a typical session — shares traded multiplied by price — averaged over a recent window.
Price-to-earnings ratio
The price-to-earnings ratio is a company's share price divided by its earnings per share.
Beta
Beta measures how much a security's price has historically moved for a given move in its benchmark.

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General information about market vocabulary, written to be descriptive rather than prescriptive. Not investment advice — see the risk disclosure.