« Return on Equity | Main | Growth Factor »

Market Cap

Short for market capitalization. It is the market value of the firm’s equity (stock). It does not include the firm’s debt (bonds). Investment professionals and the financial media often speak of micro cap, small cap, mid cap, large cap, and mega cap stocks. This simply refers to what the equity in the firm would be worth if every share was valued at the market price (i.e., the price of the last trade).

Remember, market cap does not directly measure the size of a business in any meaningful sense: sales, profits, employees, etc. Market cap can be viewed as the price tag on a business (as can enterprise value). Aside from this purpose, I have never found market cap to have any utility whatsoever.

TrackBack

TrackBack URL for this entry:
http://www.gannononinvesting.com/cgi/mt/mt-tb.cgi/28

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)