How do you calculate the market value of the firm?



1
How do you calculate the market value of the firm?

3 Answer(s)


2


The market value of a company is nothing but the value of the company as represented by the public stock market. This value of the company is determined by supply and demand of the company shares by the public shareholders of the company. This supply and demand is in turn determined by 3 things. Number 1 – the company's fundamental operations, number 2 – market sentiments, number 3 – macro economic factors like inflation, GDP, growth rates, unemployment, etc.

The formula to calculate the market value of a company is equal to number of shares outstanding of the company multiplied by the stock price of the company. The number of shares outstanding of the company can be obtained from the company filings available publicly and the stock price of the company can be obtained from the stock market.

Multiplying the per share price with the total number of shares outstanding will give you the total market capitalization of the company. This is otherwise called the equity valuation of the company. For example when somebody tells you Google is a $300 billion company, they are typically referring to the market capitalization or the equity valuation of the company and not the revenue. So when people say Google is a $300 billion company that means that number of Google's shares outstanding multiplied by stock price is equal to $300 billion.

0

Click this link to read about the Ultimate Guide to Financial Modelling

0

When analyzing a company's financial health or looking to take ownership of it, estimating the company's value is a crucial process. Unfortunately, an entire business cannot be valued as easily as a smaller, more liquid asset like a share of stock. However, there are several ways to calculate the market value of a company with relative accuracy. These methods involve considering the company's stock value, analyzing recent comparable sales, and analyzing the company's balance sheet.

Your Answer

Click on this code-snippet-icon icon to add code snippet.

Upload Files (Maximum image file size - 1.5 MB, other file size - 10 MB, total size - not more than 50 MB)

Email
Password