What is Market Capitalization?
The total market value of a company's outstanding shares.
Formal Definition
Market capitalization equals share price multiplied by total shares outstanding. It classifies companies into mega-cap (over $200B), large-cap ($10B-$200B), mid-cap ($2B-$10B), small-cap ($300M-$2B), and micro-cap. Market cap drives index inclusion and weighting; the S&P 500, for example, is weighted by free-float market cap.
In Simple Terms
It is the total price tag on an entire company if you bought every share at once. It tells you how big a company is, which is why people call firms large-cap or small-cap.
Example
A company with 500 million shares trading at $100 has a market cap of $50 billion (large-cap).