Market capitalisation is a price multiplied by a share count
Market capitalisation measures a company's equity value at the current share price. If it has 10 lakh outstanding shares trading at ₹50 each, its market capitalisation is ₹5 crore. This is not the cash the company holds, its annual revenue or the value of all its assets.
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A market value of the equity
The calculation is straightforward: multiply the current share price by the number of outstanding shares. A company with 10 lakh shares priced at ₹50 has a ₹5 crore market capitalisation.
A change in the share price changes this number even if no money enters the company's bank account. Most stock-market trades occur between investors, so payment usually goes to the selling investor.
Market capitalisation also does not include debt in the same way that a broader business valuation measure might. It prices the shareholders' ownership interest.
Buying every share would not necessarily cost exactly the quoted market capitalisation. A large acquisition can affect the trading price and may involve a negotiated premium for control.