Back
~
2
min read
· Posted on
August 20, 2021

What’s market capitalisation?

Ever seen a company say its “market cap” is $5 billion? And no, they’re not referring to a very expensive snapback.

What's the key learning?

  • Market capitalisation refers to how much a company is worth on the stock market.
  • The equation to work it out is: number of outstanding shares x share price = market cap.
  • Market cap is a quick and easy way for investors to gauge how big a company is.

Ever seen a company say its “market cap” is $5 billion? And no, they’re not referring to a very expensive snapback.

Market capitalisation refers to how much a company is worth on the stock market. And there’s a pretty simple equation to figure it out: number of outstanding shares x share price = market cap.

So if there are 1,000,000 shares on the stock market, and the share price of that company is $100, the company has a ‘market cap’ of $100 million. 

What does market cap show?

Market cap is a quick and easy way for investors to gauge how big a company is.

But because you need shares and a share price to work it out, market cap only works with public companies.If you’re trying to diversify your portfolio, market cap will help you pick companies of different sizes i.e. large-cap (above $10 billion), mid-cap ($1 to $10 billion) or small-cap ($50 to $500 million).

Who has the biggest market cap in the world?

This is always a changing beast.

Why? Because the number of shares outstanding can change and the share price always is changing. But, for the last few years, we’ve seen Apple hit a market cap over $2 trillion. INSANE.

Saudi Aramco, Microsoft and Amazon are also up there. In Australia, we’ve seen BHP leading the charge with a market cap >$150 billion and then Commonwealth Bank of Australia (aka CBA aka CommBank aka Big Yellow) with a market cap over $100bn.


Ready to win at money?

Sign up for Flux and join 100,000 members of the Flux family

A button to App StoreGoogle Play store button
Excellent  4.9 out of 5
Star rating