Market Capitalization

Market capitalization, or market cap, represents the total market value of a company's outstanding shares. It is calculated by multiplying the current stock price by the total number of shares outstanding.

Market cap provides a quick measure of a company's size and is used to categorize stocks into different tiers. It reflects what the market collectively believes the entire company is worth at any given moment.

Market Cap Categories

Mega-cap companies have market capitalizations over $200 billion. These are the largest companies in the world and typically dominate their industries. Large-cap companies range from $10 billion to $200 billion. Mid-cap companies range from $2 billion to $10 billion. Small-cap companies are under $2 billion.

Larger companies tend to be more stable but may have less growth potential. Smaller companies offer more growth potential but carry higher risk. Many investors diversify across market cap categories to balance risk and return.