Consider the following statements regarding the total market capitalisation of a company:1. It can be calculated by multiplying the number of outstanding shares of a company by the current price of its shares.2. It represents the marketandrsquo;s perception of a companyandrsquo;s worth and helps investors predict the future performance of the companyandrsquo;s stock.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?

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Consider the following statements regarding the total market capitalisation of a company:

1. It can be calculated by multiplying the number of outstanding shares of a company by the current price of its shares.

2. It represents the market’s perception of a company’s worth and helps investors predict the future performance of the company’s stock.

Which of the statements given above is/are correct?

a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2

Correct answer is option 'C'. Can you explain this answer?

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Daily Current Affairs MCQ- February 14, 2024

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Consider the following statements regarding the total market capitalis...

Reliance Industries Limited (RIL) recently became the first Indian company to surpass Rs 20 lakh crore in market capitalisation.

About Market Capitalisation:

Market Capitalization, or Market Cap, is a term used to represent the market value of a company based on its current share price and the total number of its outstanding shares.
It can be calculated by multiplying the number of outstanding shares of a company by the current price of its shares.
It represents the market’s perception of a company’s worth and indicates its size and significance in the financial markets.
On the basis of market cap, companies may be classified as large-cap, mid-cap, or small-cap companies.
Large-cap companies are usually stable, reputable, and well-established businesses that have a significant market share. They have market caps of INR 20,000 crore or more.
Mid-cap companies have a market cap ranging from INR 5,000 crore to INR 20,000 crore.
Small-cap companies operate at a smaller scale than large-cap and mid-cap companies. Consequently, their market cap is also lower (less than INR 5,000 crore).
Why is market capitalization important?
It allows potential investors to understand the true value of companies and the size of one company in relation to another.
It helps investors predict the future performance of the stock of a company because it reflects what the market is willing to pay for the stock.

What is Free float market capitalisation?

While calculating the total market capitalization of a company, all the shares, including the ones publicly traded as well as those held by promoters, government, or other private parties, are multiplied with the stock price.
But in the free-float market capitalization, we exclude shares held by private parties like promoters, trusts, or the government.
We only consider shares held and traded by the public and multiply them with share price to arrive at the free-float market capitalization of a company.

Hence both statements are correct.

Answered by Notes Wala · View profile

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Consider the following statements regarding the total market capitalisation of a company:1. It can be calculated by multiplying the number of outstanding shares of a company by the current price of its shares.2. It represents the market’s perception of a company’s worth and helps investors predict the future performance of the company’s stock.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?

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