What is market capitalization?

Market capitalization is the price an asset will fetch in the market or the value that the investment community places on a particular stock or business. Market capitalization is also commonly used to refer to the market value of a publicly traded company and is calculated by multiplying the number of shares in circulation by the market price. It can also be the market value of the shares of a company traded on a particular stock exchange, since there are companies traded on several markets.

As an example, a company with 10 million shares selling for $100 each would have a market capitalization of $1 billion. The investment community uses this figure to determine the size of a company, rather than using sales or total assets figures. In an acquisition, market capitalization is used to determine whether a takeover candidate represents good value for the acquirer. Determining market value is easiest for exchange-traded instruments such as stocks and futures because market prices are widely disseminated and readily available, but the greatest difficulty in determining market value lies in the inability to estimate the value of illiquid assets such as real estate and businesses, which may require the use of real estate appraisers and business appraisers, respectively. Market value is the price an asset fetches in the market and is often used to refer to market capitalization. Market values are dynamic in nature because they depend on a range of factors, from physical operating conditions to the economic climate and supply-demand dynamics.   Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!