# How to calculate the market cap?

In August 2018, Apple shares reached \$ 1 trillion in the stock market. This was a turning point in the volume of stock market transactions. It should be noted that this figure is higher than the GDP of most countries, including the Netherlands, Saudi Arabia, and even Switzerland.

After Apple, other companies such as Amazon, Microsoft, and Google reached the \$ 1 trillion market cap in one year.

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But you may be wondering what is a market cap and how is it calculated. How to estimate the market cap? To become more familiar with these concepts, we provide detailed explanations below.

## Market Cap

The market capitalization is the total amount of stock value of a brand or company based on the share price and the number of shares available to its shareholders.

Market cap accurately shows the amount of capital of a company. Because the market is volatile and the chances of buying and selling stocks are very high during the day, the market value of a brand also fluctuates a lot.

The stock price is the price based on the dollar that is considered to buy or sell shares. Stock prices are also constantly changing based on the supply and demand of the product by the company or brand.

Stocks also depend on several important factors, such as the amount of stock held by shareholders or investors, which can be traded as an asset in the market. Stocks represent a type of real estate for each individual.

But how do you calculate the market cap of a company, brand, or stock?

## How to calculate the market cap

The method of calculating the market cap is straightforward. Its formula is the price per share multiplied by the number of shares.

Suppose a company puts each of its shares on the market for \$ 20 and has 1 million shares. So the market cap is something like \$ 20 million.

Sometimes the stock price is one of the main reasons for changing the market cap rate, but companies can create a new asset by selling and adding new shares to investors and raising this capital for research and development and cases. Use another.

The number of shares, just like the value of the share, affects the market cap rate. Therefore, to calculate the market cap, two elements of stock price and the number of shares should always be considered.

Market cap is the key to recognizing the credibility and value of a company or brand in the market. For more information, the S&P 500 lists the 500 US companies with the largest market cap. In other ways, the FTSE 100 includes the 100 largest companies in London based on the Market cap.

### The impact of Market Cap on investment

Investors can enter the market to buy stocks by relying on the market cap of a brand or company. Based on investment strategies, companies are classified into Small Cap, Medium Cap, and Large Cap.

### Large-Cap Companies

Companies with between \$ 10 billion and \$ 200 billion in market cap are in the extensive cap range. Most of the world’s most reputable brands are on this list.

Here are three of the biggest companies on the Large Caps list:

1. American Express (NYSE: AXP)
2. McDonald’s (NYSE: MCD(
3. The Walt Disney Company (NYSE: DIS)

Large caps are those companies that have a high reputation, value, and brand strength and have been among the top companies in the world in the long run.

These companies can be considered safe, long-term, and significant investments.

### Mid-Cap Companies

Companies in the mid-cap category have a market cap of between \$ 2 billion and \$ 10 billion. These companies have less credit than large caps, but they can still be a very safe investment in their own right.

Mid-cap companies:

1. Dollar Tree (Nasdaq: DLTR)
2. NuSkin Enterprises (NYSE: NU)
3. Snap Inc. (NYSE: SNAP)

Of course, these companies are in higher ranks in terms of investment challenges than large-cap companies because they have more price fluctuations and lower credit.

### Small-Cap Companies

On the other hand, companies in the Small Cap category are worth \$ 300 million and \$ 2 billion. Most of these companies are start-ups and have just started raising capital.

1. Century Casinos (Nasdaq: CNTY)
2. Pope John’s International (Nasdaq: PZZA)
3. Southwestern Energy Co (NYSE: SWN)

In terms of price volatility, these types of companies are highly volatile but can be profitable in a short time if they continue the proper investment process.

### Classification and efficiency

There are remarkable differences between the three categories, but each has its strengths and weaknesses that sometimes any investor can start buying and investing by examining these cases.

The best strategy is investing in different categories with different market caps, buying stocks, and having them in your packaging.

By combining all three categories, you can build a robust investment platform based on large, medium, and small companies.

### The impact of Market Cap on shareholders

Market cap is one of the essential elements in measuring the market value of a stock based on investment credit. This rate can provide an overview of the context in which people want to invest.

One of the main reasons for the increase in the market cap rate is the increase in a company’s stock price. But why are stocks soaring?

1. Strong annual reports
2. Positive events
3. Practical improvements
4. Create a solid economic approach

The devaluation of the market cap also depends on many factors, such as:

1. Intra-organizational problems
2. Problems of demand loss
3. Negative performance against other competitors
4. Creating a weak economic approach

### What is the intrinsic price of a stock?

However, you should keep in mind that Market Cap is not the only option you should consider when choosing a company as an investment benchmark.

Market cap shows the size of a brand at a specific time. The higher the rate, the more likely it is that this will happen in the future.

The stock market operates very optimally, with public companies being priced based on the information they provide. Investors can use Market Cap as the inherent price of a company. Intrinsic price is precisely the value that investors with all their knowledge are willing to pay for the company’s share.

Each investor buys a stock based on a company’s intrinsic price and surveys and sells it if it feels that the value of the company’s stock is below its intrinsic value.

### Market cap for public companies

One of the main reasons for a company’s success is its market cap. Market cap can pinpoint items.

1. what stock exchange they’re on
2. The value of the capital they can put
3. Investors who can attract.

Based on the calculation or survey of the market cap, the investor can decide whether to invest or not.

### Listing on Stock Exchanges

For companies to enter a significant stock market such as the NYSE or Nasdaq, they must reach a specific market cap. Large companies are easily placed in these markets due to the high market cap and meeting investors’ expectations.

Each company must have sold nearly 1.1 million shares and a market cap of at least \$ 40 million to enter the NYSE.

To be listed on the Nasdaq, you need to sell 1.25 million shares of public stock and Market Cap for \$ 50 million.

If a company’s market cap value falls below that, the company must be removed from the NYSE or Nasdaq stock market list and join another market. Although leaving these markets is not the same as going bankrupt, it significantly reduces the capital available.

## How to increase market cap

As we said, the value of the market cap is one of the most influential parameters for a company in the stock market. But there are ways to increase the market cap.

A company can sell more stocks at a higher price by producing new products, fiscal policies, more purchases, and expanding covered markets. In this case, the market cap will also increase.

### Improves Balance Sheet And Pays Down Debt

As the value of a company’s market cap increases, so does the ability to pay off debts and open up financial avenues.

### Unlocks Value For Stakeholders

You can persuade shareholders to buy more shares by offering tempting services and offers, in which case the value of the company’s market cap will also increase.

### Attracts Accredited Investors

Attracting reputable investors can also help increase the market cap directly. If you can get more investment by interacting with more reputable people and presenting your potential programs, you can attract significant investments and increase your market cap.

## Conclusion

First, as we said, measure the market cap with a simple formula, then, based on the value obtained, divide the company into one of three main categories. How big a company is makes you realize when and how much stock you can buy from it. Companies like Tesla have developed credible strategies to quickly raise the market cap to \$ 1 trillion by standard principles.

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