Nooby question bear with me...
Who cares about market capitalization if one company could have 5% of its equity outstanding in the form of stocks and another could have 50%? You see market capitalization everywhere but I don't understand how its any kind of useful thing to know about a company.
You are misunderstanding what equity is.
A stock is just a share of the company--it represents ownership of that company. So all of a company's stock together is the company itself. There is no "5% equity outstanding" or "50% equity outstanding". If you know how many stocks a company has, and you know the stock price, then you know the market cap. And that itself is the size of the company--100%.
no... market cap is market value of shares outstanding. you are assuming here that 100% of equity is trading.. That is not always true..
Market cap matters because size matters. If you invest $1M in a company with a $10B market cap, you're a drop in the bucket. You're getting larger percentage stake if you invest in a company with a $10M market cap, though. See the difference?
Good question, OP.. here are my 2 cents... market cap - to me - loosely indicates the impact one particular company can have on the stock market.. it means nothing to the average joe but I would assume it is used in the trading community to gauge the amount of "damage" one stock can do - kinda like boxers are classified into buckets based on their weight.
it's rather uncommon to have 100% equity trading as well
I'm sorry but you guys made me more confused lol
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