Definition
The total value of a company’s outstanding shares of stock. It’s used to determine the company’s size and investment risk.
What to consider
- Use it as one indicator of a company’s stability.
- Larger companies tend to be less volatile, but smaller ones might offer higher growth.
- Balance your investments based on your risk tolerance.
Real world scenarios
- Researching Apple’s large market cap, George sees it ranks among mega-cap stocks, reflecting investor confidence.
- Rosa invests in small-cap companies, hoping for higher growth while accepting more volatility than large-cap peers.
- A shifting market cap can signal changes in how investors value a company’s future prospects.
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