Total market value of a company's outstanding shares - share price times shares outstanding.
Formula
Market Cap = Share Price × Shares Outstanding
What it is
The price the public market is currently putting on the entire equity of a business. Apple at $190/share with 15B shares = $2.85T market cap.
What it is NOT
Market cap is not the cost of buying the whole business. That's enterprise value (market cap + debt − cash). Market cap is just the equity slice.
Market cap is not the company's "size" in any economic sense. Two companies at $10B market cap can have wildly different revenue, employees, profit, and economic footprint.
How it's used
Index inclusion: most major indices (S&P 500, Russell 1000) weight by market cap
Liquidity: larger market cap = more shares trading per day = easier to buy/sell without moving the price
Categorisation:
- Large cap: > $10B (the S&P 500 and similar)
- Mid cap: $2B–$10B
- Small cap: $300M–$2B
- Micro cap: < $300M
Why size affects strategy
Larger companies are studied by hundreds of analysts; mispricings are rarer. Smaller companies are followed by fewer eyes; mispricings are more common but with higher transaction-cost and liquidity drag. Most academic literature on "the value premium" finds it stronger in small-cap territory.