Word of the Week!
Yes the word of the week is a day late this week. Sorry. This week’s word is a common investing term that may not be that well known to new investors. That word is market capitalization. We hear this word all the time, but what does it truly mean? Market capitalization is essentially the dollar amount that the market values a company at. This sounds all well and good, but how does one figure out what the market values a company at? The answer to this is quite simple really. Market capitalization is determined by multiplying the number of outstanding shares by its current price.
Say company WXYZ is trading at $20/share and has 1 million shares outstanding. The market capitalization for WXYZ corporation is $20/share x 1 million shares = $20 million. So we can say that the market values WXYZ at $20 million.
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