What is it?
Market capitalization refers to the total dollar market value of a company’s equity. Commonly referred to as “market cap,” it is calculated by multiplying a company’s shares outstanding by the current market price of one share.
Who is interested?
The financial community and investors.
What does it tell me?
The investment community uses this figure to determine a company’s size in terms of equity market capitalization, as opposed to using sales or total asset figures.
Using market capitalization to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested, including risk.