What is Market Capitalisation? How can we measure it?

Market capitalization, often abbreviated to market cap, is a business term that refers to the aggregate value of a firm's outstanding common shares. In essence, market capitalization reflects the total value of a firm's equity currently available on the market. This measure differs from equity value to the extent that a firm has outstanding stock options or other securities convertible to common shares. The size and growth of a firm's market capitalization is often one of the critical measurements of a public company's success or failure. However, market capitalization may increase or decrease for reasons unrelated to performance such as acquisitions, divestitures and stock repurchases.

Market capitalization is the number of common shares multiplied by the current price of those shares. The term capitalization is sometimes used as a synonym of market capitalization; more often, it denotes the total amount of funds used to finance a firm's balance sheet and is calculated as market capitalization plus debt (book or market value) plus preferred stock.

The total market capitalization of all the companies listed on the New York Stock Exchange is greater than the amount of money in the United States [1]. The global market capitalization for all stock markets was $43.6 trillion in March 2006 [2