Market Capitalization
Definition
Market capitalization is the total market value of a company's equity: share price multiplied by shares outstanding. For valuation work, practitioners use diluted shares — factoring in in-the-money options, warrants, RSUs, and convertibles (commonly via the treasury stock method for options) — so market cap reflects all claims on the equity.
Market cap is the market's value of the equity only. It is the starting point for equity value and differs from enterprise value, which adds net debt and other non-equity claims to capture the value of the whole business regardless of financing.
Rough US size buckets — large cap (often $10bn+), mid cap (~$2–10bn), small cap (under ~$2bn) — vary by source and drift with the market, so treat them as conventions, not rules.
Why interviewers ask
Interviewers use market cap as the on-ramp to the equity value vs enterprise value discussion, one of the most heavily tested topics in IB recruiting. Expect questions like 'a company issues stock — what happens to its market cap and its EV?' Precision about diluted shares and about what market cap does and does not include is exactly what's being graded.
Related terms
Interviews don't test definitions — they test recall under pressure.
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