How Are a Company’s Stock Price and Market Cap Determined?
A company’s worth—or its total market value—is called its market capitalization, or market cap. A company’s market cap at any given time can be determined by multiplying its stock price by the number of shares outstanding.
Therefore, any significant change in a stock price results in an equal percentage change in the company’s market cap. This is one of the reasons why investors are so concerned with stock prices. A $0.10 drop in a stock price results in a $100,000 loss on paper for a shareholder with one million shares.
Key Takeaways
- A company’s market capitalization—also called its market cap—is a straightforward measure of the company’s market value.
- Market cap is calculated by taking the current share price and…
