What is market capitalization?

Market capitalization, or market cap, is the total market value of a publicly traded company's outstanding shares. It’s calculated by multiplying the current share price by the total number of outstanding shares. For example, if a company has 10 million shares priced at $50 each, its market cap is $500 million. Market cap is commonly used to classify companies by size: small-cap (under $2 billion), mid-cap ($2–$10 billion), and large-cap (over $10 billion). It helps investors compare companies of different sizes and assess risk. Generally, large-cap companies are considered more stable and less risky, while small-cap firms may offer higher growth potential but with greater volatility. Market cap does not reflect a company’s actual value or financial health, but it’s a quick way to gauge relative size in the stock market.