Aug 19, 2021 | Knowledge Market capitalization simply explained

Table of contents

1. What is market capitalization?
2. How is market capitalization calculated?
3. What does market capitalization tell us?
4. Table of the world's largest companies by market capitalization

What is market capitalization?

Market capitalization is a common indicator used to roughly classify the size of a company and compare it with other companies. A distinction is made between large, mid and small caps (“cap” is the abbreviation for capitalization). The distinction is usually made on the basis of market capitalization: large caps > € 5 billion, mid caps > € 2 billion, small caps < € 2 billion.

Market capitalization is also referred to as the market capitalization of a company.

The most important facts in brief

• Common key figure for assessing the size of a company
• A distinction is made between large, mid and small caps
• Market capitalization is not the company value

How is market capitalization calculated?

Market capitalization is calculated by multiplying the share price by the number of shares issued.

Calculating market capitalization:

The calculation of Tesla 's market capitalization as of August 16, 2021 is shown as an illustration:

What does the market capitalization tell us?

Market capitalization reflects the value that shareholders would be willing to pay for a company's equity. Market capitalization can fluctuate greatly depending on the volatility (price fluctuations) of the individual share and changes daily.

Please note: Market capitalization does not represent the value that would have to be paid to buy the entire company, as a company's debt and liquid assets, for example, are not taken into account in market capitalization. The “Enterprise Value” represents this adjusted company value

Table of the world's largest companies by market capitalization