What is 'market capitalization'?

Market capitalization refers to the total value of a company's outstanding shares of stock, which is fundamentally important for evaluating a company's size and market value. It is calculated by multiplying the stock price by the total number of outstanding shares. This figure provides investors with a snapshot of company value in the context of the stock market and can influence investment decisions. Market capitalization is used to classify companies into categories such as small-cap, mid-cap, or large-cap, which helps in assessing investment risk and potential growth.

In contrast, the total amount of sales in a fiscal year is a measure of revenue, which does not directly indicate market value. A measure of a company's profitability could refer to various financial metrics, but it does not encompass the broader concept of market capitalization. Lastly, the ratio of a company's debt to equity addresses the financial leverage of a company and its capital structure, which is separate from the market value represented by market capitalization.