Quick answer
Market capitalization (market cap) is the total market value of a company's outstanding shares: the current price of one share multiplied by the number of shares outstanding [1].
#How is market capitalization calculated?
The formula has two inputs. Investor.gov defines market cap as the current public market price of one share multiplied by the number of total outstanding shares [1]. FINRA adds that outstanding shares include publicly traded shares plus restricted shares held by company officers and insiders [2].
Because the share price changes every trading day, market cap changes with it. A company does not have to do anything for its market cap to rise or fall; the market simply reprices it.
Worked example
Share price is not company size
Company A has 400 million shares trading at $55. Company B has 2 billion shares trading at $12.
- Company A (400,000,000 × $55)
- $22 billion
- Company B (2,000,000,000 × $12)
- $24 billion
Company B has the lower share price but the larger market cap. A high price per share does not mean a bigger company.
Hypothetical companies for illustration.
#What do large-cap, mid-cap and small-cap mean?
Investors often group companies by market cap. FINRA gives these common bands, while noting that the dividing lines between groups can vary [2].
| Label | Approximate market cap |
|---|---|
| Mega-cap | $200 billion or more |
| Large-cap | $10 billion to $200 billion |
| Mid-cap | $2 billion to $10 billion |
| Small-cap | $250 million to $2 billion |
| Micro-cap | Less than $250 million |
These labels show up in fund names and index rules. A "large-cap fund" mostly holds big companies; see what an index fund is for how indexes use size to pick members.
#What does market cap not tell you?
- Whether a stock is cheap or expensive. Market cap is a price, not a verdict. Ratios such as the P/E ratio compare that price with earnings.
- How much debt the company has. Two companies with the same market cap can owe very different amounts.
- Book value. FINRA describes book value as an accounting figure, total assets minus total liabilities, which is a different measure from market value [3].
Related terms
Frequently asked questions
Is market cap the same as what a company is worth?
It is what the stock market is paying for the company's shares at a moment in time. Other measures, such as book value, can give a very different figure.
Can market cap change if the company issues no new shares?
Yes. Market cap moves with the share price every trading day, even when the number of shares stays the same.
Why do index providers care about market cap?
Size is often how an index is defined. S&P Dow Jones Indices describes the S&P 500 as a gauge of large-cap U.S. stocks that covers approximately 80% of available market capitalization [4].
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- U.S. SEC — Investor.gov. Market Capitalization (glossary) (2026). Accessed 2026-10-03.A
- FINRA. Market Cap Explained (2022). Accessed 2026-10-03.A
- FINRA. Defining the Value of an Investment (2025). Accessed 2026-10-03.A
- S&P Dow Jones Indices. S&P 500 (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
