How Market Cap Is Calculated
Formula: Current Share Price × Total Shares Outstanding
Example: share price $50 × 1 billion shares = $50 billion market cap. This figure changes in real time as the share price moves.
Size Categories
Large-Cap (>$10 bn): Established companies with stable earnings and high liquidity. Examples: Apple, Microsoft, LVMH.
Mid-Cap ($2–10 bn): Balance of growth potential and relative stability.
Small-Cap (<$2 bn): Higher growth potential but lower liquidity and greater price volatility.
Limitations of Market Cap
Market cap ignores debt. A highly indebted company may look cheap by market cap. Enterprise Value (EV = market cap + net debt) gives a more complete picture for comparing companies with different capital structures.