Market capitalization facts for kids
Market capitalization, often called market cap, is a way to measure how much a company is worth. It's the total value of all the shares of a company that are owned by investors.
To figure out a company's market cap, you simply multiply the current price of one share by the total number of shares that exist.
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What is Market Cap?
Market cap is often used to compare the size of different companies. It shows the value of a company's shares, but it doesn't include how much money the company might owe (its debt).
A more complete way to measure a company's size is called enterprise value (EV). This measure includes debt and other things, giving a fuller picture of the company's total worth.
Market cap is also used to rank the size of stock exchanges. This is done by adding up the market caps of all the companies listed on that exchange. In 2020, the total market cap of all publicly traded companies in the world was about US$93 trillion!
World Market Cap Over Time
Here's a look at the total market value of all public companies in the world from 1975 to 2020. This table shows how much the total value has grown and how many companies were listed each year.
| Year | World market cap (in millions of US$) |
World market cap (% of GDP) |
Number of listed companies |
|---|---|---|---|
| 1975 | 1,149,245 | 27.2 | 14,577 |
| 1980 | 2,525,736 | 29.6 | 17,273 |
| 1985 | 4,684,978 | 47.0 | 20,555 |
| 1990 | 9,519,107 | 50.8 | 23,732 |
| 1991 | 11,340,785 | 56.8 | 24,666 |
| 1992 | 10,819,256 | 50.2 | 24,947 |
| 1993 | 13,897,390 | 61.7 | 28,300 |
| 1994 | 14,639,924 | 60.9 | 30,290 |
| 1995 | 17,263,728 | 64.0 | 33,379 |
| 1996 | 19,806,691 | 72.3 | 35,617 |
| 1997 | 22,029,761 | 80.7 | 36,946 |
| 1998 | 24,555,201 | 89.6 | 37,928 |
| 1999 | 33,181,159 | 115.1 | 38,414 |
| 2000 | 30,925,434 | 101.1 | 39,892 |
| 2001 | 26,792,162 | 88.4 | 40,157 |
| 2002 | 22,802,792 | 72.7 | 38,894 |
| 2003 | 31,107,425 | 84.9 | 41,051 |
| 2004 | 36,540,980 | 89.2 | 38,724 |
| 2005 | 40,512,446 | 92.6 | 39,096 |
| 2006 | 50,074,966 | 106.1 | 43,104 |
| 2007 | 60,456,082 | 114.0 | 44,034 |
| 2008 | 32,418,516 | 56.2 | 43,949 |
| 2009 | 47,471,293 | 83.8 | 42,669 |
| 2010 | 54,259,518 | 87.3 | 43,427 |
| 2011 | 47,521,341 | 68.8 | 44,323 |
| 2012 | 54,503,237 | 78.4 | 43,772 |
| 2013 | 64,367,842 | 89.0 | 44,853 |
| 2014 | 67,177,254 | 90.3 | 45,743 |
| 2015 | 62,268,184 | 94.5 | 43,983 |
| 2016 | 65,117,714 | 97.1 | 43,806 |
| 2017 | 79,501,948 | 111.1 | 43,440 |
| 2018 | 68,893,044 | 91.9 | 43,554 |
| 2019 | 78,825,583 | 108.4 | 43,248 |
| 2020 | 93,686,226 | 134.7 |
How to Calculate Market Cap
The formula for market cap is quite simple: Market Cap (MC) = Number of Shares (N) × Price Per Share (P)
Let's look at an example:
- Imagine a company has 4 million shares available.
- If each share costs $20, its market cap would be $80 million (4 million × $20).
- If the share price goes up to $21, the market cap becomes $84 million.
- If the price drops to $19, the market cap falls to $76 million.
Not all shares of a company are traded openly. The shares that are available for trading are called the "float." The float is usually less than the total number of shares because some shares might be restricted from trading. Sometimes, a "free-float market cap" is calculated using only these freely traded shares, which gives a smaller number.
Market Cap Categories
Companies are often grouped by their market cap size. These groups help investors understand the general size of a company.
Here are the common categories:
- Mega-cap: These are the very largest companies.
- Large-cap: Big companies.
- Mid-cap: Medium-sized companies.
- Small-cap: Smaller companies.
- Micro-cap: Very small companies.
- Nano-cap: Extremely tiny companies.
There isn't one official rule for where the cut-off lines are between these groups. Different stock indexes might use slightly different numbers. Also, these numbers change over time because of things like inflation and how much the market is generally worth. What was considered a "large-cap" company many years ago might be a "mid-cap" or "small-cap" company today.
See also
In Spanish: Capitalización de mercado para niños
- Authorised capital
- List of countries by stock market capitalization
- List of public corporations by market capitalization
- Market price
- Treasury stock
