Course 302:
Market Capitalization
In this course
1 Introduction
2 Market Cap Reflects the Market's Opinion
3 Market Cap among Sectors

Which company is bigger, Barnes & Noble BKS or Amazon.com AMZN? Barnes & Nobel generated more than $3 billion in sales from the fourth quarter of 1998 through the third quarter of 1999, the most of any U.S. bookseller. Amazon's sales during the same period were $1.2 billion, less than half as much. But from another perspective, Amazon was more than 10 times bigger: Its market cap as of mid-November 1999 was close to $25 billion, compared with about $1.5 billion for Barnes & Noble. Why the difference? Market capitalization (or market cap, for short) is the total dollar value of a company's stock, or the price per share times the number of outstanding shares. The most important thing determining this value is not the company's current size in terms of sales but the market's perception of its future prospects. If investors think a company will grow very fast, they are likely to bid up its share price.

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