Granthara01.01.05Market capitalisation0%

Market capitalisation is a starting point for judging size, not a valuation. Nothing in this lesson says a company is worth buying at any price.

01.01.05 · Market capitalisation

Every headline that calls a company big is quoting one number, and it is the simplest one in this course: what one share costs, multiplied by how many exist.

The number that actually says how big

Bharat Foods is a ₹500 crore company. That sentence has a precise meaning.

Part 01 · Ownership, Not Tickers
  1. 01.01.01 What a share of a company is
  2. 01.01.02 Ownership vs lending: equity vs debt
  3. 01.01.03 Authorised, issued, subscribed and paid-up capital
  4. 01.01.04 Why price alone tells you nothing about size
  5. 01.01.05 Market capitalisation
  6. 01.01.06 What a shareholder is entitled to
  7. 01.01.07 What a shareholder is not entitled to
  8. 01.01.08 Limited liability
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Learn

One multiplication

Market capitalisation is the market price of one share times the number of shares in issue. Nothing more complicated is hiding inside it.

Bharat Foods trades at ₹500 and has one crore shares. Its market capitalisation is ₹500 crore. That is what the market says the whole company is worth today.

Illustrative example
Market price of one share
₹500
Shares in issue
1,00,00,000
Your holding
10 shares
₹500 croremarket capitalisation
₹5,000the market value of your stake

Your ten shares are the same multiplication on a smaller scale. Ten times ₹500 is ₹5,000 — and ₹5,000 out of ₹500 crore is the 0.0001% of the company you have owned since the first lesson.

See it

Move the price, watch the company resize

The share count is fixed at one crore. Only the price moves — and it moves both numbers at once.

Your stake stays at 0.0001% at every price. What changes is what that slice is worth.

Market capitalisation is a price the market is asking. It is not money the company holds.

Learn

What it is not

It is not cash in the company's account. Bharat Foods does not have ₹500 crore sitting anywhere — that figure is what its shares would fetch, not what it owns.

It is also not what buying the company would cost. A buyer takes on its debts too, and gets its cash. Adjusting for both gives a different figure, called enterprise value, which this course reaches later.

₹500 croreprice × share count — nothing else in the formulacount it
Try it

A company has 4 crore shares trading at ₹250. Drag to its market capitalisation, in crore rupees.

400 crore

That single number is how the market sorts companies into large, mid and small — the classification this course returns to when it looks at how indices are built.

Before you read this, which was true?

Remember

Market capitalisation is price times share count — what the market asks for the whole company today, not what the company owns.

Everything this chapter has told you, in order

  1. 01.01.01A share is a small unit of ownership in a real business. Buy one, and your money now rides on how that business performs.
  2. 01.01.02A lender is promised a fixed return and paid first. An owner is promised nothing and paid last, and keeps whatever is left.
  3. 01.01.03Only issued shares exist. The authorised figure is a ceiling the company may never reach, and face value is bookkeeping — not what you pay.
  4. 01.01.04A share price is one slice, not the cake. Until you know how many slices a company cut, its price tells you nothing about its size.
  5. 01.01.05Market capitalisation is price times share count — what the market asks for the whole company today, not what the company owns.
Next
01.01.06 — What a shareholder is entitled to

You know what your slice is worth. Now for what it actually entitles you to.