What does "market capitalization" refer to?

Market capitalization refers to the total market value of a company's outstanding shares of stock. This is calculated by multiplying the current stock price by the total number of outstanding shares. It serves as a crucial indicator for investors to assess a company's size and market value, providing insight into its growth potential and risk profile. The value derived from market capitalization helps differentiate between small-cap, mid-cap, and large-cap companies, influencing investment strategies and portfolio diversification.

This measure is key because it reflects the market's perception of a company's value rather than just its book value or earnings. Investors often use market capitalization as a basis for making decisions regarding buying, holding, or selling investments, indicating its importance within financial markets.