Market Capitalization

In short

Total market value of a company's shares — size classification for stocks

Market cap = share price × shares outstanding. Apple at $200/share with 15B shares = $3T market cap. Large caps (>$10B) are stable. Small caps (<$2B) are riskier but have more growth potential.

Market cap classifies companies by size: mega-cap (>$200B), large-cap ($10-200B), mid-cap ($2-10B), small-cap ($300M-2B), and micro-cap (<$300M). Smaller companies have higher growth potential but more volatility, lower liquidity, and less analyst coverage.

Formula

Market Cap = Share Price × Shares Outstanding

Thresholds

< $300M: Micro-cap — speculative
$300M-2B: Small-cap — growth potential
$2B-10B: Mid-cap — balanced
$10B-200B: Large-cap — stable
> $200B: Mega-cap — market leader

Related concepts

P/E Ratio — Imagine buying a lemonade stand that makes $100/year. If it costs $2,000, the P/E is 20 — you need 20 years of earnings to pay it off. Lower means cheaper.
Enterprise Value — Market cap tells you what the equity is worth. Enterprise value tells you what the WHOLE company is worth, including what it owes (debt) minus what it holds in cash. If a company has a $10B market cap, $3B of debt, and $1B of cash, its EV is $12B — the closer estimate of a true acquisition price.
Diversification — If you put all your money in one stock and it crashes, you lose everything. Spread it across 20 different stocks, sectors, and even countries — when one falls, others may rise, protecting your overall wealth.
ETF (Exchange-Traded Fund) — An ETF is like a basket of stocks that trades on the stock exchange just like a share. Buy one ETF and you might own 500 companies. They combine the diversification of mutual funds with the trading flexibility of stocks.