Market Cap Stock
The market cap of a stock is simply the multiplication of the number of outstanding shares by the price per share. The market cap is essentially the cost of the whole corporation if you were to try and buy every share (without the price changing.) It’s good to note the market cap of a company when looking at factors like earnings and debt or when comparing one stock in a sector to another. Making a ratio out of the earnings and debt to the whole market cap puts those large numbers in perspective.
Also, the market cap compared to a competitor may help judge if a buy out is a potential because of the market cap is lower than the cash flow of the larger foe.
An interesting aside – GM is asking for 4 billion dollars to survive the month of December from Congress. However, the whole market cap for GM is only 2.5 billion compared to Ford’s 7 billion. Would you loan a company nearly twice what their worth when you could just buy the stock? Market caps are worth keeping an eye on.
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