What Is Market Capitalization/Market Cap.? Valuation with examples....! Why Is It So Important? (#43)

What Is Market Capitalization?

Market Capitalization is basically the Total Value Of A Company.

To do the valuation.... we multiply the total number of outstanding shares with the current share price....

For instance— if one share of a company is of 10$ & there are currently in total 100,000 shares in the market....

[No. of outstanding shares = 100,000

Current Share Price = $10]

then the Market Cap. (100,000*10) would be of 1 Million $.... which means the Company is worth 1 Million Dollars!

& if the price of the share increases by just 1$ making the share price of 11$ then the Market Cap. increases by 100,000$ (11$*100,000 = 1,100,000$ [gain $1 per share; hence, 100,000$ gain in total])

Note—— it's just an example.... the calculations made are of small numbers, to make it look simple and easy for everyone to.... in reality many Companies Market Capitalization is of around Billion--Trillion Dollars in total!

Why Is Market Cap. So Important?

Well, it is so because the Market Cap. basically lets the investors to have an overview of how large the Company exactly is! As, the greater the Market Capitalization.... the larger the Company! Then it can further be taken into the analysis & after doing more research on the Company— (after checking other important metrics, etc. etc. —) a wise decision can be made [regarding Investing.... in that particular Company]

Anyways, so that's all for today.... I hope y'all understood 'bout What Market Cap. is & Why Is It Important!

Thanks For Reading!

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