Medical Economics November 29, 2023
Though a company’s capital structure includes both equity and debt, market cap does not reflect debt.
Some commonly used financial terms are commonly misunderstood. Such is the case with “market capitalization,” which refers to a figure widely believed to represent a company’s value.
Yet, unbeknownst to many individual investors (and some advisors), this conception of the term is misguided because market cap only tells half the story of a company’s actual value.
Nevertheless, in company descriptions and summaries, “market cap” is ubiquitous. Everywhere you look — in media articles, on brokerage websites, on cable financial channels and in financial columns — you see references to it.
Market cap is calculated by multiplying the share price by the number of outstanding...
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