Market Capitalisation

The Market Capitalisation of a company is the number of shares in issue multiplied by the share price. This gives a total value of the company from an investors point of view. It does not represent any absolute value of the company business and its assets, since often companies are either under or over valued by the market.

One of the main investing principles is to find a company whose 'true' value in terms of it's business model and assets owned, is greater than it's Market Capitalisation, meaning that an investor will be able to buy the business 'cheaply'.

The reason the words 'true' and 'cheaply' are in quotes is to illustrate that estimating the absolute value of a business and it's assets at any one point in time can be difficult because of the continually changing factors used in all valuation techniques. At best a 'true' value will only be an estimate which might take into account some element that the wider investors market has somehow missed.

What to do if you need more help

If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.

We hope you found this information useful.

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