Market capitalization is calculated by multiplying the current share price by which quantity?

• A. Issued shares
• B. Outstanding shares
• C. Authorized shares
• D. Treasury shares

Answer: (B)

Market capitalization reflects the total value of all shares currently available to trade. It is found by multiplying the price of one share by the number of shares that are outstanding—those shares that are issued and held by investors and are actually in circulation.

Think of outstanding shares as the pool of stock that can be bought and sold on the market right now. Issued shares include everything that has ever been issued, including shares the company may have bought back and holds as treasury shares, which aren’t traded. Authorized shares are just the maximum number the company could issue under its charter, not what’s actually trading. Treasury shares are the shares the company has repurchased and still holds, not part of the shares available in the market. So the most accurate measure for market cap uses the current price times the outstanding shares. If there are different classes of stock, you’d compute the market cap by class accordingly.