How is market capitalization defined?

Market capitalization is defined as the total market value of a company's outstanding shares. This is calculated by multiplying the current stock price by the total number of shares that are available for trading in the market. It serves as a key indicator of a company's size and is commonly used by investors to gauge the relative size of companies within the stock market. A company's market capitalization can be categorized into different segments, such as large-cap, mid-cap, and small-cap, which helps investors make decisions based on their investment strategies and risk tolerances.

The definition distinguishes market capitalization from other financial metrics. For instance, total revenue refers to the income generated by a company through its business operations, but it does not reflect the company's size in terms of equity ownership. Average share price only provides a snapshot of the stock's price without considering the number of shares, thereby failing to give a full picture of a company's overall market value. Total assets owned by a company measure its resources but do not capture market perceptions or investor sentiment about the company's worth.