What does market capitalisation refer to?

Market capitalisation is a key financial metric that represents the market value of a company's outstanding shares of stock. It is calculated by multiplying the current share price by the total number of outstanding shares. This figure provides investors and analysts with an understanding of the size and value of a company in the market, making it an essential indicator for assessing the company's worth compared to others in the same industry.

By focusing on the market value of shares, market capitalisation reflects investor perception and the company's performance in the stock market, rather than operational metrics like total revenues or net worth. It serves as a useful tool for comparing companies and assessing investment opportunities within various sectors. The relevance of market capitalisation is heightened during investment decisions, as it influences portfolio choices and risk assessment in equity markets.