Term · Market & Classification
Market capitalisation
In briefMarket capitalisation is the market value of all shares outstanding at the current price. It is the fundamental measure for whether a company counts as a small, micro or nano cap.
Definition
Market capitalisation is the market value of a company's shares outstanding at the prevailing price.
How it is calculated
Formula. Market capitalisation = share price × number of shares outstanding. For a fully diluted view, account for potential shares separately.
Why it matters for small caps
A basic classification measure for whether a company counts as a small, micro or nano cap at all.
Common misreadings
- Market capitalisation is not the same as enterprise value and says little about liquidity on its own. Multiple share classes and treasury shares can change the calculation.
In the process
Frequently asked
What is market capitalisation?
It states the stock-market value of a company's equity. The basis is the price and the number of shares outstanding.
How is market capitalisation calculated?
You multiply the share price by the number of shares outstanding. For a fully diluted view, you include potential additional shares separately.
Why does market capitalisation say little on its own?
It does not correspond to enterprise value and makes no statement about liquidity. Multiple share classes and treasury shares can also change the calculation.
Related terms
Sources
Primary
STOXX – Guide to the DAX Equity Indices
https://www.dax-indices.com/document/Resources/Guides/DAX\_Equity\_Indices.pdf
https://www.dax-indices.com/document/Resources/Guides/DAX\_Equity\_Indices.pdf
Methodology
NYU Stern – Aswath Damodaran, Valuation Resources
https://pages.stern.nyu.edu/\~adamodar/
https://pages.stern.nyu.edu/\~adamodar/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.