market capitalization

The value of a corporation derived by multiplying its stock price by the number of outstanding shares. For example, a company with a stock price of $20 and 10 million shares outstanding has a market capitalization of $200 million.

The value of a company’s market capitalization determines whether it is small cap, mid cap, or large cap. However, cap size definitions vary greatly among financial firms. A general guideline is that a small-cap company has a market capitalization of $300 million to $1 billion; a mid-cap company ranges from $1 billion up to $5 billion; and a large-cap company is over $5 billion. Sometimes, companies under $300 million are called micro-cap companies. To calculate the market capitalization of foreign companies that have issued American Depositary Receipts (ADR) in the United States, only the outstanding ADR shares are used, and shares that are issued and traded in other countries are excluded.