Investor Ratios
Market Capitalisation
Market capitalisation is the market value of a company's equity.
Concept First
Learn It Step By Step
Start with the business meaning, then move into the formula.
What is Market Price per Share?
Current quoted price per share. It reflects market expectations and is used in valuation ratios. Example: the current stock exchange price per share used in P/E, market cap, and dividend yield calculations.
How should I read the answer?
It shows what the equity market currently values the company at.
Formula Lab
Understand the Formula
Read the formula like a business sentence before calculating it.
Formula
Market Capitalisation = Market Price per Share x Number of Shares
Interpretation
What This Means In Practice
Read the result as a business signal, not as a standalone number.
Market ratios need business evidence
It shows what the equity market currently values the company at. A market multiple is not a verdict by itself. It reflects expectations about earnings quality, growth, risk, capital structure, and governance.
Avoid the cheap-or-expensive shortcut
Market capitalisation shows the market value of equity, not the whole business. For full firm value, compare it with debt and cash through enterprise value. Compare with peers, growth outlook, balance-sheet risk, return on capital, and cash conversion before deciding whether the market price is justified.
Key Takeaway
Market capitalisation shows the market value of equity, not the whole business. For full firm value, compare it with debt and cash through enterprise value.
Practice Checkpoint
Check Your Understanding
Work through the quiz in smaller sets. Your answers stay visible while this page is open, so you can review before moving on.
Question 1 of 20
Level 1The result measures:
Question 2 of 20
Level 1Which metric starts with the result and adjusts for debt and cash?
Question 3 of 20
Level 1Which underlying item must you understand before calculating or interpreting the result?
Question 4 of 20
Level 1Which statement is the best conceptual reading of this measure?
Question 5 of 20
Level 1While analysing the result, which connected business driver should you also check because it can explain movement in the result?
15 questions remaining in this lesson.
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Ratio Analysis - An Introduction
Ratio Analysis Foundations
Knowledge Path
Connected Concepts
2 linked lessons