What is Market Value Of Equity?

Market value of equity is the total dollar value of a company's equity and is also known as 澳洲幸运5官方开奖结果体彩网:market capitalization. This measure of a company's value i🍸s calculated by multꦬiplying the current stock price by the total number of outstanding shares. A company's market value of equity is therefore always changing as these two input variables change. It is used to measure a company's size and helps investors diversify their investments across companies of different sizes and different levels of risk.

Investors looking to calculate market value of equity can find the total number of shares outstanding by looking to the equity section of a company's balance sheet.

Understanding Market Value Of Equity

A company's market value of equity can be thought of as the total value of the company decided by investors. The market value of equity can shift significantly throughout a trading day, particularly if there are significant news items like earnings. Large companies tend to be more stable in terms of market value of equity owing to the number and diversity of investors they have. Small, 澳洲幸运5官方开奖结果体彩网:thinly-traded companies can easily see double digit shifts in the market value of equity because of a relatively small number of transactions pushin𒉰g the stock up or down. This is also why small companies can be targets for market manipulation.

Calculating Market Value of Equity

Market value of equity is calculated by multiplying the number of shares outstanding by the 澳洲幸运5官方开奖结果体彩网:current share price. For example, on March 28, 2019, Apple stock was trading at $188.72 per share. As of this date, the company's 澳洲幸运5官方开奖结果体彩网:stock buy back program h𓄧as lowered the shares outstanding from over 6 billion to 4,715,280,000. So the market equity of capitalization is calculated as follows🃏:

Stock Price ($188.72) x Shares Outstanding (4,715,280,000) = $889,867,641,600

For ♌simplicity, people usually quote the above market value of🍰 equity as $889.9 billion.

The Difference Between Market Value of Equity, Enterprꦓise Value and Book Value

Market value of equity can be compared to other valuations like 澳洲幸运5官方开奖结果体彩网:book value and 澳洲幸运5官方开奖结果体彩网:enterprise value. A company's enterprise value incorporates its market value of equity ᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚinto the equation along with total debt minus cash and cash equivalents to provide a rough idea of a company's takeover valuation.

The market value of equity is also distinct from the book value of equity. The book value of equity is based on 澳洲幸运5官方开奖结果体彩网:stockholders' equity, which is a line item on the company's balance sheet. A company's market value of equity differs from its book value of equity because the book value of equity focuses on owned assets and owed liabilities. The market value of equity is generally believed to price in some of the company's growth potential beyond its current balance sheet. If the book value is above the market value of equity, however, it may be due to market oversight. This means the company is a potential 澳洲幸运5官方开奖结果体彩网:value buy.

Market Value of Equity and Market Profile

In general, there are three different levels of market capitalization, and each level has its own profile. Companies with a market capitalization of less than $2 billion are considered small capitalization, or 澳洲幸运5官方开奖结果体彩网:small caps. Companies with a market capitalization of between $2 billion and $10 billion are considered medium capitalization stocks, also referred to as mid-caps. Companies with a market capitalization over $10 billion are considered large capitalization, or 澳洲幸运5官方开奖结果体彩网:large caps.

Each level has a profile that can help investors gain insights into the behavior of the company. Small caps are generally young companies in the growth stage of development. They are risky, but have higher growth potential. Large caps are mature companies; they may not offer the same growth potential, but they can offer stability. Mid-caps offer a hybrid of the two. By owning stocks in each category, investors ensure a certain amount of 澳洲幸运5官方开奖结果体彩网:diversification in assets, sales, maturity, management, growth rate, growth prospects and 澳洲幸运5官方开奖结果体彩网:market depth.