Definition
Market capitalization is the market value of a company’s shares. In the simple case, it is calculated as the share price multiplied by the number of shares outstanding. If different classes exist, the calculation must be aligned with their prices and quantities. Capitalization changes with quotations and corporate actions.
Example
If a hypothetical share costs 300 roubles and 6 thousand corresponding shares are outstanding, capitalization is 1.8 million roubles. This is a market valuation of the holdings at the current quotation, not money sitting in the company’s account. Selling a large block may occur at another price.
Limitations
Capitalization does not automatically include all debt and is not the same as enterprise value, EV. It also differs from book equity. An investor uses it to assess scale and comparative measures while checking the price date, share structure and reliability of the input count. A large company size by itself does not guarantee a reliable investment.