Market Capitalization or the total value of a company as shown in the market, what does it mean? You know we covered EPS and PE just yesterday

In Case you missed that message – you can access it here https://twitter.com/FinsenseG/status/1280722140937908224

Market capitalization is the total value of a company as of the date when you are looking at it. It simply means the price of the share multiplied by the total number of shares. Now there are 2 types of market capitalization methods.

Free Float Market Capitalization – Suppose you have a company ABC which has 100 shares. Out of that 50 shares are owned by the promoter and 50 shares are being bought and sold in the market

(These freely tradeable shares are called free float because they are available in the market, but the promoter’s 50 shares are not as they hold onto them and don’t buy sell like normal investors).

Now suppose the share price is Rs 5, then the free-float market cap becomes Rs 5 * 50 = Rs 250 (Note – Again reiterating, we only took freely tradeable shares which are available in the market)

Full Market Capitalization – Continuing the same example above. We know there are total of 100 shares. 50 owned by promoters and the rest by 50.

Now Full market capitalization method takes into account the complete total number of shares be it held by promoters or be it freely tradeable. So in this method, the full market cap of ABC will be Rs 5*100 = Rs 500.

End of thread.