What is Market Capitalization

Market capitalization, often called "market cap," is the total value of a company's outstanding shares of stock. It is calculated by multiplying the company's stock price by the total number of shares outstanding. For example, if a company has 100 million shares outstanding and each share is worth $10, the company's market capitalization would be $1 billion. Investors use market capitalization to compare the size of companies. Companies are often grouped into three categories:

- Large-cap companies: Generally valued at $10 billion or more.

- Mid-cap companies: Generally valued between $2 billion and $10 billion.

- Small-cap companies: Generally valued below $2 billion.

Large-cap companies are often more established and stable, while small-cap companies may offer higher growth potential but can also carry more risk. Understanding market capitalization can help investors evaluate companies and build a diversified investment portfolio.

FYI: This article is for educational purposes only and should not be considered financial advice. Always do your own research before making investment decisions.