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Market capitalization is the number of common Shares multiplied by the current price of those shares. The term capitalization is sometimes used as a synonym of market capitalization; more often, it denotes the total amount of funds used to finance a firm's Balance Sheet and is calculated as market capitalization plus Debt (book or market value) plus Preferred Stock . The total market capitalization of all the companies listed on the s was $43.6 trillion in March 2006 {Link without Title} . VALUATION See Also: Business valuation Market capitalization is a function of the price of a firm's stock and may not accurately reflect intrinsic value because of varying future expectations held by investors. It is common for a firm's market capitalization to exceed " Book Value " ( Shareholders' Equity ) because market prices tend to increase at a quicker pace than earnings accumulate due to value placed on expected future growth. For instance, in the late 1990s the shares of Internet -related companies were highly valued by the market, and tiny companies with almost no sales (but high growth) generated market capitalizations in the billions of Dollar s. "FLOAT" The amount of shares available on the Open Market , the " Free Float ", is sometimes less than the total number of shares because a portion of the outstanding shares may be held by " Insiders ," and/or by the company as Treasury Stock . In addition to the float being perhaps much smaller than the total number of shares, a significant portion of the float may be owned by large Institutional Investors who rarely trade. As a result, on any given trading day, generally only a small percentage of shares is traded, as in the example of Yahoo!, about 1.5% (20,025,727/1,180,000,000). The sudden availability on the open market of all of a company's stock, as a result of both the insiders and the company selling all shares held, could cause a plummet in the stock price (if unexpected and not already priced in by the market). CATEGORIZATION OF COMPANIES BY MARKET CAP While there are no strong definitions for market cap categorizations, a few terms are frequently used to group companies by capitalization. In the U.S., companies and stocks are often categorized by the following approximate market capitalization values:
The small-cap definition is far more controversial than those for the mid-cap and large-cap classes. Typical values for the ranges are enumerated here:
'' Blue Chip '' is sometimes used as a synonym for large-cap, while some investors consider any micro-cap or nano-cap issue to be a '' Penny Stock '', regardless of share price. EXAMPLES Examples of share valuation compared to market cap (price), and share ownership, from Yahoo! Inc. ( [http://finance.yahoo.com/q/mh?s=YHOO ) Valuation measures
Share statistics
ttm = Trailing twelve months (or last twelve months) LEVELS ''Main article: Equity Levels And Flows '' Stock Market capitalisation 2003 (compared with GDP converted to € through estimated Purchasing Power Parity exchange rates)
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