if a company has 1,000 shares at a price of $2 per share, which includes earnings per share of $1, the market capitalization is $2000.
The total value of the outstanding common shares owned by stockholders of a publicly traded firm is its market capitalisation, often known as market cap.
Market capitalization is calculated by multiplying the number of outstanding common shares by the market price per common share. Since outstanding stock is traded on open markets, capitalization can be used to gauge how the public perceives a company's net worth. It also plays a role in some stock valuation models. Ranking the size of corporations sometimes depends on market capitalization. Only the equity portion of a company's capital structure is measured; management's choice of how much debt (or leverage) to use to finance the company is not taken into account.
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