What is Market Capitalisation?
Market capitalisation, often called market cap, is one fo the simplest ways to measure the sIze of a company on the market. It is calculated by multiplying the current share price by the total number of shares a company has issued. For example, if a company has one billion shares and eash trades at $10, the market cap is $10 billion dollars.
Share price * Number of shares = Market Cap.
Investors use market cap to compare company sizes quickly. Large-cap companies, like the big banks or mining giants on the ASX, are usually stable businesses with steady earnings and dividends. Mid-cap companies sit in the middle, often balancing growth and stability. Small-cap companies are younger or riskier businesses. They might grow quickly, but they can also be more volatile.
Market cap is also important because it decides how much weight a company has in indexes like the ASX200. Bigger companies influence the index more than smaller ones. For beginners, market cap is a quick way to get context. It helps you see if you’re looking at a giant of the market or a small, emerging player.