• Home Page
  • Comparison: Market Globalization: What Is Market Capitalization Method?

Comparison: Market Globalization: What Is Market Capitalization Method?

Improved Essays
Show More
What is Market Capitalization Method?
Market Capitalization is one of the company valuation methods which is based on market approach and involves company valuation measures using current stock market data (Amadeo, 2016). It focuses on the market value of the company (Amadeo, 2016). It is called Market Cap as well. It is calculated by the price of each share multiplied by the total number of issued shares held by shareholders (Nikolaev, 2016). This method mainly is used for public companies where the share price is publicly available. Also it can be calculated for private companies by considering the price of a share based on the latest trade (Victor, 2015). When a company is private, the value calculated by Market Capitalization method is …show more content…
It is important to consider specially when Book Value of a company is more than its Market Value (Valuation Techniques Overview, n.d.).
If the market value is less than book value, investors may see an opportunity. If market value is higher than the book value, then the company is growing.

Comparison: Market Capitalization vs Book Value
Market Capitalization is based on the projected value of a company’s share price, but Book Value is the actual worth of the company based on financial records (Valuation Techniques Overview, n.d.). Book Value of a company is equal to the value of its equity, but Market Capitalization is the current market value of its shares (Valuation Techniques Overview, n.d.). Book Value considers tangible assets of a company while calculating the company value, but Market Capitalization is the whole value of both tangible and intangible assets like brand values (Valuation Techniques Overview, n.d.).
When the Market Value of a company is more than its Book Value, the buyer is paying more money for something with less value, so it will be loss (Valuation Techniques Overview, n.d.). Conversely, when the Book Value of a company is more than the Market Value, it is profit for the buyer (Valuation Techniques Overview,

Related Documents

  • Superior Essays

    Toyon Research Corporation Case Summary
    • 2080 Words
    • 9 Pages

    Toyon Research Corporation Case Summary

    I work for Toyon Research Corporation, a small, employee-owned company. I am also one of the two trustees for Toyon’s Employee Stock Ownership Plan (ESOP), and several years ago I was one of seven directors on our company’s board, and may decide to serve again in the future. While, Toyon is a closed corporation, it is still subject to many of the same laws governing organizations with publically traded stock. In fact, Toyon has experienced first-hand some of the difficulties big corporations face in abiding by the countless rules and regulations that they must conform to, including ERISA.…

    • 2080 Words
    • 9 Pages
    Superior Essays
    Read More
  • Improved Essays

    Avery Dennison
    • 801 Words
    • 4 Pages

    Avery Dennison

    Expected return of the company (based on our valuation) is 10%. Currently, AVY P/E ratio is 23.0 and justified P/E is…

    • 801 Words
    • 4 Pages
    Improved Essays
    Read More
  • Improved Essays

    Moserk Company Ratio Analysis
    • 709 Words
    • 3 Pages

    Moserk Company Ratio Analysis

    One way these calculations have been developed and analyzed is through the use of ratios. Financial ratios produce a numerical value that can then be compared to other businesses or even to industry averages. The results following the financial statements for the Moserk Company produces interesting outcomes. When compared to the industry averages, there were a few that proved…

    • 709 Words
    • 3 Pages
    Improved Essays
    Read More
  • Decent Essays

    Comparison Of Apple, Microsoft And Berkshire Hathaway
    • 211 Words
    • 1 Pages

    Comparison Of Apple, Microsoft And Berkshire Hathaway

    Three of the most valuable stocks of all time include Apple, Microsoft and Berkshire Hathaway, according to Investopedia. In 2015, Apple became the first company in American history to reach a market capitalization of $700 billion, which at the time was twice the size of the oil giant Exxon Mobil. In 1999, Microsoft became the first company in to close with a market capitalization of $600 billion, cites USA Today Money. The market capitalization is a company’s stock price multiplied by the number of shares outstanding. Since 2007, Apple’s market value rose from $100 billion to $700 billion in 2015, which many analysts call an “earth-shattering” valuation.…

    • 211 Words
    • 1 Pages
    Decent Essays
    Read More
  • Improved Essays

    Discount Cash Flow Model
    • 1257 Words
    • 5 Pages

    Discount Cash Flow Model

    Moreover, the lower capital expenditure in future years also can be an evidence of improved trend of free cash flow. Therefore, if we applied for this series of free cash flow in the discount model, these inputs can effectively show the intrinsic value of Royal mail. Terminal value In my discount model, the terminal growth rate is 0.5% and the WACC rate is 8.3%, with the group EBIT margin of 6.5%. For the estimation of terminal value, we applied for a constant growth formula which equals to the 2017FYE’s forecasted FCF divided by the difference between discount rate and terminal growth rate(g).…

    • 1257 Words
    • 5 Pages
    Improved Essays
    Read More
  • Improved Essays

    Pacificorp Liquidity Ratios
    • 901 Words
    • 4 Pages

    Pacificorp Liquidity Ratios

    Owing to the fact that PacifiCorp is a private firm that is why there is not enough information available to do a detailed valuaton of the company. However, the current ratio of the company is found to be more than 1 which shows a positive outlook. Current Ratio is a liquidity ratio and measures the ability of a firm to pay its Current (Short term) liabilities with its Current (Short term) assets. A ratio of greater than 1 would indicate availability of more current assets per unit of current liabilities. A ratio of less than 1 is considered to be risky as the firm will face problems meetings its short term obligations.…

    • 901 Words
    • 4 Pages
    Improved Essays
    Read More
  • Improved Essays

    Swot Analysis 4.4
    • 1090 Words
    • 5 Pages

    Swot Analysis 4.4

    4.4 Performance and Value Price to earnings ratio, is a ratio used to value a company, it measures the current share price relative to earnings per share and is indicator of the value of the organisation. The main objective for a company is to create wealth for its shareholders (Petty et al, 2012). REG and Japara were listed on the ASX after end of FY2014, due to this data is not available for comparison. Figure 4 shows good price earnings per share for both companies, with REG showing a greater return of 20% per share over JAP for FY2015. 4.5 Profitability Net profit as shown in figure 6 is a representation of every dollar in sales remaining after all expenses are paid, the balance remaining is net profit.…

    • 1090 Words
    • 5 Pages
    Improved Essays
    Read More
  • Improved Essays

    Ratio Analysis For Company G
    • 903 Words
    • 4 Pages

    Ratio Analysis For Company G

    Price Earnings Ratio represents weakness for Company G. M. Book value per share of common stock: Measurement to determine levels of share safety once debt is paid. An increment from 20011’s $4.25 to a $5.87 ratio in 2012 tops quartile industry benchmarks (4.9/5.5), 6.0 being the highest. Book Value per Share of Common Stock represents strength for Company G.…

    • 903 Words
    • 4 Pages
    Improved Essays
    Read More
  • Great Essays

    Costco Capital Structure
    • 1954 Words
    • 8 Pages

    Costco Capital Structure

    Capital Structure Debt and equity are the principal components of a company’s long term capital and capital structure describes this composition (combination of debt and equity) of the company’s permanent/long term capital. Capital structure is an indicator of how a firm finances its overall operations and growth using the different sources of funds available. It is a mix of long-term debt, short-term debt, common equity and preferred equity. Debt is in the form of bond issues or long-term notes payable while equity can be common stock, preferred stock or retained earnings. The proportion of short and long term debt is considered while analyzing the capital structure.…

    • 1954 Words
    • 8 Pages
    Great Essays
    Read More
  • Decent Essays

    Incredible Debt
    • 237 Words
    • 1 Pages

    Incredible Debt

    What is a convertible debt? A short term debt that is owned by the company, which can be converted into share values at any desired time. The debt includes the loans and funding it had received from its investors. The company does not have to pay any premiums for these debts.…

    • 237 Words
    • 1 Pages
    Decent Essays
    Read More
  • Improved Essays

    Healthcare Cost Analysis Paper
    • 851 Words
    • 4 Pages

    Healthcare Cost Analysis Paper

    The cost accounting system is becoming increasingly important to the organization. Cost analysis helps manager in making decision in areas like pricing, profit, planning, setting standard cost capital investment decision, marketing decision, cost management decisions and others The importance of accounting in managerial decision has been recognized in the literature. Cost data and analysis helps manager in making decision and to pass these decisions on various issues concerning their organization’s. It is these methods which provide an organization the necessary tools to function. Managerial accounting incorporates the strategy of the body of the finances regarding the accounting system.…

    • 851 Words
    • 4 Pages
    Improved Essays
    Read More
  • Improved Essays

    Concentrated Allocation: In A Perfect World
    • 1610 Words
    • 7 Pages

    Concentrated Allocation: In A Perfect World

    Background Story I grew up in a city roughly halfway between Seattle and Tacoma where much of the population is toward the low socioeconomic standing. Spending grades K-12 in the public school district that was not the worst, but certainly not the best. Learning has always come naturally, so I was never pressured to give my education much (if any) thought until the summer before starting my sophomore year of high school. The next few years were the most agonizing and the influential of my life. A turbulent divorce left my mom working two jobs and forced an involuntary maturation process.…

    • 1610 Words
    • 7 Pages
    Improved Essays
    Read More
  • Improved Essays

    California Pizza Kitchen Case Study
    • 976 Words
    • 4 Pages

    California Pizza Kitchen Case Study

    3 The cost of Equity Capital represents the expected return of equity investors. The WACC is measured by taking the weight of debt outstanding and multiplying it by the cost of debt and the tax shield, then adding to that the weight of equity and multiplying that by the cost of equity, as shown in the following equation: Equation 1: [D/V*(Rd)*(1-T)+E/B*(Rd)] As the WACC holds true, the increased weight in the lower cost of debt along with the additional tax shield and the decrease in weight in the higher cost of equity will result in a decrease in the overall cost of equity to the firm. In theory the more debt you add to the capital structure the lower your WACC will be Cost of Equity: Using the formula given, cost of equity can be calculated as:…

    • 976 Words
    • 4 Pages
    Improved Essays
    Read More
  • Superior Essays

    Nike Case Study Summary
    • 1659 Words
    • 7 Pages

    Nike Case Study Summary

    As she was still unsure of her findings she had her assistant, Joanna Cohen, estimate Nike’s cost of capital. Cohen used WACC, weighted average cost of capital for the estimate of 8.3. WACC is the weighted average cost of capital. Its calculations consist of a firm’s cost of capital in which each category of…

    • 1659 Words
    • 7 Pages
    Superior Essays
    Read More
  • Superior Essays

    Huaneng Power International Case Study
    • 1033 Words
    • 5 Pages

    Huaneng Power International Case Study

    3. What criteria are important in determining the market for this firm’s stock? Companies are influenced by so many factors that it is practically impossible to develop a formula for predicting success of investments (Investopedia, 2015). Nonetheless, a basic method of stock-picking, fundamental analysis looks at 3 levels (En.tradehero.mobi, 2013). The economy level (En.tradehero.mobi, 2013) would focus on a China’s economic indicators such as the expanding GDP and rising inflation.…

    • 1033 Words
    • 5 Pages
    Superior Essays
    Read More

Related Topics

Ready To Get Started?
Discover
Company
Follow
©2024 Cram.com
Privacy Policy |  About Ads |  Site Map |  Advertise  | 
  • Cookie Settings