What Is a Stock Market Cap and Financial Ratios?

A stock market, equities market, or share exchange is an establishment where stock shares of various organizations are traded. These may consist of securities listed on a publicly accessible stock exchange, such as the New York Stock Exchange (NYSE). Another type of stock market is an agreement between a group of corporations to purchase and sell stock at stated agreed upon prices from the participants in the agreement. There is also the option for trading in derivative instruments between the participant and an exchange or brokerage firm.

In order to obtain a full picture of how much an investor can make on the stock market through their purchases, it is necessary to first understand what all shares are. Stocks are shares that have been issued by a company. The price that they are sold for will be determined by the company that issues them, as well as the overall value of the economy. The price of a particular share will reflect its individual financial characteristics, such as its credit risk, initial dividend payment, and market capitalization. One’s estimate of the current stock market cap and financial ratios are derived from the market value of all shares outstanding plus the current diluted stock market cap.

Per share, also referred to as a “sale-ability” rating, is an indicator of an investment’s future potential value based on the total value of all outstanding shares of the issuing company multiplied by the current per share price. Dividends are payments made by the company either at a quarterly or yearly basis. The yield to equity, also referred to as the “effective” per share, is a ratio of the current market price of the stock to the total shareholder’s equity. Lastly, the credit risk, also referred to as the “risk-free” per share rating, is a ratio of the stock’s current market price to the total debt or assets of the company.