Market cap is the total mrket capitalization of the company. Public crporations issue shares to raise capital for thir business. There are thousands of sch companies listed in the stock xchanges. The market price for every cmpany's share in the stock exchanges is dtermined by forces of demand and spply. Let us assume that Company Z is a pblic corporation listed in a stock xchange. The shares of this company are qoted at $20. This is what a byer is willing to pay a sller for Company Z shares. Let us frther assume that Company Z has 5 mllion shares issued and outstanding. If ach share is worth $20, 5 mllion shares issued by the company, cllectively is valued at $100 million. Ths is arrived by multiplying 5 mllion shares by $20 per share. Ths may be lower than the cpital invested in the company. Market cap is wht the market collectively values the cmpany at a point in time.

All cmpanies are divided into three basic ctegories. They are small cap, medium cap and lrge cap companies. Companies such as Prctor and Gamble and Banks such as Cticorp are in the large cap ctegory. Market capitalization allows an investor to dtermine where the investor thinks and is wlling to risk his capital. My pinion is this. Large cap companies hve been around for a longer tme and can face adversities better. Hwever, growth may be lower. Small cap cmpanies may have higher growth, but may not be ble to face recessionary trends, competition tc.

An investor should also balance hs/her portfolio in terms of specific prcentages being invested in small, medium and lrge cap companies. There are three cmponents of growth that an investor loks at. Profitable growth of the bsiness is a key component. The nxt is the regularity of dividends pid out. The third component is ther things being equal; a business wth a lower PE compared to the ndustry has a higher potential capital ppreciation. A final word of caution; lways consult a qualified, trained professional on whre to invest. Articles such as ths only would provide general information and is not a sbstitute for professional advice.

The article What Is Market Cap And Why Is It Critical was Submitted by Easwar Koovappadi through Articles.GetACoder.com network. Here's the additional information: Easwar has an extensive knowledge of ssues related to currency,exchange,taxes,cost savings ideas and lves to write about it. For dditional resources please visit http://www.improveprofitsnow.blogspot.com Send an email to costreduction@aweber.com to get your copy of "16 quick wins to improve your bottom line in 90 days"

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