Capitalization

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A listed company's capitalization refers to a combination of the total market value of the company's outstanding shares (usually called market capitalization or 'market cap' for short) plus its long-term debt. Market cap is the most common determinant used by investors to determine a corporation's size and is calculated by multiplying its total outstanding shares by their current market price.

The broader term 'capitalization' is used mostly in financial statements to refer to the total capital - in equity and bonds or other debt - invested in a company.[1] Listed companies sized by market capitalization are usually divided into large cap (above $10 billion), mid cap ($2 - $10 billion) and small cap (under $2 billion), although some disagree with these guidelines.[2]

Cap tipped

Since the credit crisis struck in late 2007, market capitalization has also proved a useful measure of the declines in size of some of Wall Street's once towering investment banks. One comparison in September 2008 showed that large financial institutions over the previous year had lost $1 trillion of a total of $4 trillion of market cap lost by all U.S. listed companies.[3] Some of the most significant declines in Wall Street market caps were recorded in the final week (September 12-18, 2008) of the one-year period examined.

References

  1. Market capitalization. Investopedia - Forbes Digital.
  2. Market capitalization definition. InvestorWords.
  3. A Stunning Collapse of the Financial Sector Has Accelerated in the Past Week. DaveManuel.com.