Course 108: Learn the Lingo--Basic Ratios
Market Capitalization
In this course
1 Introduction
2 Earnings Per Share
3 Market Capitalization
4 Profit Margins
5 Price/Earnings and Related Ratios
6 Price/Sales Ratio
7 Price/Book Ratio
8 Price/Cash Flow
9 Dividend Yield
10 The Bottom Line

Market capitalization is essentially the market value of a company. It is calculated by multiplying the number of shares outstanding by the current share price. For example, if there are 10 million shares outstanding of ABC Corporation and ABC's stock is currently trading at $25 per share, the market capitalization of ABC is $250 million. As we will find out shortly, market capitalization not only gives you an idea concerning the size of a company, it can also be used when calculating the basic valuation ratios.

Market Capitalization = (Stock Price) x (Shares Outstanding)

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