What is Market Cap
Stock market has become a new venture of investment yielding high return in smalltime frame. Though this is at high risk option of investment but when it works gives unexpected profits to the investors. This has made it so popular that share market is no more a business of capitalists; it has a huge investor base with small capital.
In spite of knowing about different risk factors in share market and its volatility, people invest based on some calculations and speculations. Market capital (Cap) is first among all on which investments are decided. Market capital of a company having IPO is its current market value, i.e. how much price to be paid to buy that company in a particular time, as it keeps varying. Market capital of a company is determine by multiplying number of shares issued by it and price of each share in market. When any of its variables goes up or down market capital changes accordingly.
Based on market capital IPO companies, market cap divides itself into three categories. Small cap includes companies having market capital less than $1 billion. Investors go for them with some hope that someday they will rise into big players. In bullish market few of such companies perform well and benefit their investors. Second category is mid cap having capital range of $1 billion to $10 billion. These companies are considered progressive and constantly heading to be included into large cap group. Third one is large cap having capital more than $10 billion. Such companies are more lucrative as they hardly face losses and have a safe future even in crisis, thus this cap, considered as most reliable and trustworthy.
Market capital is a key factor, which defines a company’s status in market. On which an investor can speculate whether he will get profits or loss investing here. It is a general criterion, but besides it, there are several factors like debt status, new deals to take place in future, PE Ratio, government policies towards the company, which decides fate of a company and its investors accordingly.
Among all statistics and accounts market is not unaffected with human sentiments. That has made market and market cap both volatile in nature. Even big players of this field find it difficult to presume any future predictions of a particular company in market. A small piece of news can change or alter stock game thoroughly. Sometimes their thunderous influences keep all market cap calculation aside.
Therefore, it is basic requirement for any investor to know about market cap of a particular company before investment but it is also to know, that it is not single factor to take into consideration. A careful thought earlier can minimize whole risk of loss in stock market.