Market Capitalization
Definition
A company's total market value: stock price multiplied by shares outstanding. Apple at $200 per share with 15 billion shares equals $3 trillion market cap. Used to categorize companies (large-cap, small-cap, etc.) and gauge relative size.
Why It Matters
Market cap helps you understand company size and risk. Smaller caps grow faster but are riskier. Larger caps are more stable. An index fund tracking market cap weights means you own more of the biggest companies (Apple, Microsoft).
Example
Company A: $50 stock × 100M shares equals $5B market cap. Company B: $100 stock × 50M shares equals $5B market cap. Same value, different share structure. Both are small-cap. Index fund weights them equally by value.