• Market capitalization relates to size and how the market values a corporation."DSCN1753" is Copyrighted by Flickr user: Perpetualtourist2000 (Perpetual Tourist) under the Creative Commons Attribution license.
  
  

Significance

• Market capitalization often relates to where a business is along its life cycle. Investors can expect younger and smaller companies to carry greater risks of failure but more potential to grow and expand. Conversely, larger and more mature companies offer more stability but lesser chances for high returns.
  
  

Calculation

• Market capitalization is calculated by multiplying the number of shares outstanding related to the corporation times its present share price. Therefore, market capitalization relates to the worth of the overall business, according to the stock market.
  
  

Types

• Stocks are broadly defined as large, middle and small capitalization companies. Some investors also identify micro and mega cap stocks at the extremes. According to Forbes' Investopedia, small caps generally feature capitalizations up to $2 billion; large cap stocks carry capitalizations of more than $10 billion. Middle capitalization stocks occupy the range from $2 billion to $10 billion.
  
  

More Information

• You can use the major stock market indices as good reference points to identify individual stocks and track performance by capitalization. The Dow Jones Industrial Average and Standard and Poors (S&P) 500 Index are associated with large cap stocks. The Russell 2000 is a benchmark, or comparison standard, for small capitalization stocks; the S&P Mid Cap 400 is made up of middle capitalization components.
  
  

Warnings

• Market capitalization alone is no indicator of performance. Stocks should be grouped by sector and fundamental analyses before you decide to invest. Fundamental analysis relates to general economics and business statistics, which may be researched from annual reports.