Question:
Market capitalisation of a company refers to
Market capitalisation of a company refers to
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Market capitalisation uses the current market price, not face value or book value.
Updated On: Jul 13, 2026
- face value of a share multiplied by the number of shares floated
- market value multiplied by the number of subscribed shares
- book value multiplied by the number of authorised shares
- none of these
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The Correct Option is B
Solution and Explanation
This question is about the standard finance definition of market capitalisation.
- Face value of a share multiplied by the number of shares floated: Face value is a fixed, printed value stamped on a share certificate and does not move with the market, so multiplying it by shares floated does not give market capitalisation.
- Market value multiplied by the number of subscribed shares: This is the correct definition. Market capitalisation is worked out by taking the current market price of one share and multiplying it by the total number of shares the company has issued and subscribers actually hold, giving the total market value of the company's equity.
- Book value multiplied by the number of authorised shares: Book value is an accounting figure drawn from the balance sheet, and authorised shares are simply the maximum a company is permitted to issue, which may be far more than what is actually subscribed, so this combination does not measure market capitalisation either.
- None of these: This is wrong since the second option correctly defines market capitalisation.
Market capitalisation always uses the current market price of a share and the number of shares actually subscribed and outstanding, not face value, book value or the authorised limit.
Let's summarize:
- Market capitalisation equals market price per share times the number of subscribed shares.
- Face value, book value and authorised share count do not enter this calculation.
The correct answer is option (2), market value multiplied by the number of subscribed shares.
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