Wednesday, July 13, 2011
What is Capitalization?
A company's capitalization refers to the total Naira market value of all of a company's outstanding shares. Capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determining a company's size, as opposed to sales or total asset figures.
If a company has 35 million shares outstanding,
each with a market value of N100, the company's market capitalization is N3.5 billion (35,000,000 x N100 per share).
Company size is a basic determinant of asset allocation and risk-return parameters for stocks and stock mutual funds. The term should not be confused with a company's "capitalization," which is a financial statement term that refers to the sum of a company's shareholders' equity plus long-term debt.
A premium profile on www.broadstreetlagos.com gives you access to the data you need. Over the next few weeks we will discuss more phrases.