What does market capitalization represent?

Market capitalization represents the current market value of a company's shares. It is calculated by multiplying the total number of outstanding shares by the current price per share in the stock market. This metric provides investors and analysts with an easy way to gauge the size of a company and its overall market value compared to others within the industry.

Understanding market capitalization is crucial for making informed investment decisions and evaluating a company’s financial health. Unlike revenue, net income, or book value, which focus on different aspects of a company's financial performance or asset valuation, market capitalization gives a snapshot of how the market values the company based on investor sentiment and trading activity. This value can fluctuate with changes in stock price, making it a dynamic measure of a company’s worth in the eyes of investors.