How to know size of the company in Stock Market? What is Market Capitalization? - 3

     In previous post we have seen what is weighted average. If you still don't know then please refer previous post. In short I'll explain, how much percentage should be in Nifty/Sensex from which sector?     

    Directly we'll dive into core part . . . . . . .

I'll give you example of two companies. Tell me which company is bigger or which company's value is more?

1. MRF

79890.20 as on 4/20/2021

2. TCS

3157.25 as on 4/20/2021

MRF is a company which produces tires and TCS is a software company. By overlooking these two companies and on the basis of share price we can say that MRF is a bigger than TCS but it is absolutely wrong.

To know which company is bigger we'll go through a formula:

Market Capitalization = Total No. of Outstanding Share * Current Share Price

Total no. of outstanding shares refer to a company's stock currently held by its all stakeholders.

 For example:

Company ABC

• Total no. of Outstanding Share = 100 Cr
• Current Share Price = 50

So clearly we can say that compony is of 5000 Cr (100*50) 

Company XYZ

• Total no. of Outstanding Share = 1000 Cr
• Current Share Price = 30

With the help of market capitalization formula - we can say that company is of 30000 Cr

I mean that, XYZ company's share price is less than ABC company but value is more than ABC.  Because total no of outstanding shares are more. I think you got the point. TCS has more no of shares that's why TCS is bigger than MRF