Market Capitalization

Extracted 14SEP2011 from

Categorization of companies by capitalization

Traditionally, companies were divided into large-cap, mid-cap, and small-cap. The terms mega-cap and micro-cap have also since come into common use, and nano-cap is sometimes heard.[3] Different numbers are used by different indexes;[3][4] there is no official definition of, or full consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over the decades due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950, but it is not very large now), and they may be different for different countries. A rule of thumb may look like:

  • Mega-cap: Over $100 billion
  • Large-cap: $10 billion–$100 billion
  • Mid-cap: $1 billion–$10 billion
  • Small-cap: $100 million–$1 billion
  • Micro-cap: $10 million-$100 million
  • Nano-cap: Below $10 million

    Cap is short for capitalization which is a measure by which we can classify a company's size. Big/Large caps are companies that have a market cap between 10-200 billion dollars. Mid caps range from 2 billion to 10 billion dollars. These might not be industry leaders but are well on their way to becoming one. Small caps are typically new or relatively young companies and have a market cap between 100 million to 1 billion dollars. SmallCap's track record won't be as lengthy as that of the Mid to MegaCaps, SmallCaps do present the possibility of greater capital appreciation, but at the cost of greater risk.

    Related measures

    Market cap reflects only the equity value of a company. A more comprehensive measure is enterprise value (EV), which includes debt and other factors. Insurance firms use a value called the embedded value (EV).