What Is Market Capitalization?

Market capitalization refers to the number of outstanding shares of a company. The market capitalization refers to the value of the company in the eyes of an investor. In crude terms it could be defined as the share price multiplied by the number of outstanding shares.

The stock market is the arena where the shares of any publicly listed company are traded. There have been occasions where the market capitalization of a company has fluctuated wildly in a remarkable short span of time. There have been occasions when the market capitalization of a company has increased because its stock price has been artificially pushed up. Market capitalization can be a misleading indicator of the potential of a company because there are many factors acting on the stock price. There are cases where two companies of similar sales and profits in the same industry have completely different market capitalizations. Most analysts measure market capitalization as a multiple of sales.