FINRA Series 86 Research Analyst Practice Exam

Market capitalization is defined as the total market value of a company's outstanding shares of stock. This calculation involves multiplying the current share price by the total number of outstanding shares. Market capitalization provides a comprehensive measure of a company's size and is often used by investors to assess the relative value of a company's equity in relation to others in the market.

Understanding market capitalization is critical for various aspects of financial analysis and investment strategies, as it helps relate the market's perception of a company's worth. Large-cap companies are generally seen as more stable investments, while small-cap companies might offer higher growth potential but come with increased risk. The definition does not pertain to a company’s revenue, net income, or total assets, which are different financial metrics that provide insights into a company's operational performance, profitability, or overall financial health rather than its market valuation.