The more the market value of your company, the more the investors took interest to invest in your company. Market capitalization is one of the essential concepts for the investors that they look before investing in any company. There are three types of the company an investor look out for, and these are small cal, medium cap, and the large market capitalization companies.
In simple words, the more value of your company in the market, the more investors took the interest. However, the market cap calculated based on the shares available in the market. For example, if the market value shares of any company are 10000 USD, then the market cap of the company would be the same as the value of shares.
Three Types of Market Capitalization Companies:
We know that there are some prospects that an investor looks into before investing in any of the company. One of the first aspects is how significant the market cap value of the company. To make it clear, we have divided this into three parts.
- Small Market Cap Companies
- Medium Market Cap Companies
- Large Market Cap Companies
#1 Small Market Cap Companies:
When the market cap value of any company lies between 500 Million dollars to 2 Billion dollars, then it carries its value as a small market cap company. There are some of the investors who invest in this kind of market cap, but most of the investors do not spend significant amounts because they are not sure about the returns.
#2 Medium Market Cap Companies:
The market cap value of medium market cap companies lies between 2 Billion Dollars to 10 Billion dollars. Most of the investors find medium market cap companies safer and most likely to invest a significant amount on these companies.
#3 Large Market Cap Companies:
Some of the big players in the industries are the significant market cap companies who carries a market cap value of more than 10 Billion Dollars. It is also known as Blue-chip companies. It is one of the safest companies in market capitalization to invest in because the cap value assures investors of the company.
Formula:
Let me clear the confusion between the equity of the company and the market capitalization it is not the same. Market capitalization calculation based on market price and the other hand, the equity value based on the books records.
The formula for calculating market capitalization is:
Market Capitalization formula = Outstanding shares * Market Price of each share
Calculation:
We know the formula for calculating the market capitalization but let’s make it more clear by solving an equation.
Example #1 We are adding some details of the company, and we need to identify the company best for the investors, and we will do it by comparing the market cap value for the same.
The details we need to know:
Company A:
Outstanding Shares: 30000
Maret Rate Per Share: 100
Company B:
Outstanding Shares: 50000
Maret Rate Per Share: 90
Formula: Market Capitalization = Outstanding shares * Market Price of each share
Company A Market Capitalization = 30000*100
Company A Market Capitalization = 3,000,000
Formula: Market Capitalization = Outstanding shares * Market Price of each share
Company B Market Capitalization = 50000*90
Company B Market Capitalization = 45,00,000
Company B has more market value cap compared to the company A., So the investor always prefers Company B first.
Conclusion:
Market capitalization is important for investors. The market cap value of the company they need to know before investing their hard-earned cash. The companies divided into three parts like small market cap companies, medium market cap companies, and, the large market cap companies. Market cap value of the company carries more importance than the books of accounts.
Hey, this is Johny Sehgal. I am the owner and caretaker at Finance Jungle. I completed my education in BSC and now heading towards the digital marketing industry. I usually have interests in reading, playing games and watching movies. I also love to write content based on quality information. The main motive of mine is to provide the top and best quality information to my readers. Finance Jungle is the blog for the same.
