Let’s reflect back on our blog post about stocks – they represent partial ownership in a publicly traded corporation.
Are you curious about understanding how to calculate the market value of a company?!
Well class is now in session and all you will need is a calculator.
What is Market Capitalization?
The market value of a company is known as its market capitalization. The formula for is as follows:
MARKET CAPITALIZATION = CURRENT STOCK PRICE X SHARES OUTSTANDING
Essentially, it is the total value of a company based on stock price and its shares.
How can I calculate it?
As I’m writing this blog post, the price of Apple, Inc. (AAPL) stock is $188.59 per share, and the number of shares outstanding is equal to 4.92 Billion!
Following our equation from above, we come up with the following result:
$188.59 X 4.92 Billion = $927,862,800,000.
YES, you read that correctly – Apple, Inc. is worth almost $1 trillion!
To clear up our understanding of terminology, shares outstanding represents the various shareholders or owners of Apple, Inc.
Keep in mind that the market capitalization changes throughout the day, as reflected in its stock price and changes to the number of shares.
So there you have it! You’re now equipped with a new investing tool – calculating the market value of a publicly traded company.