One way to measure the value of a publicly traded company is by its market capitalization (or “market cap”), which is the total value of all its currently held stock.
So a company that has 1,000 shares of stock in public hands, those shares selling for $1 apiece, would have a market cap of $1,000.
This measurement is typically used to demonstrate the scale of a company and not necessarily anything else, but it often serves as a stand-in for other metrics of value and success: the “largest company in the world” lists generally use market cap as a prime metric, for instance.
It’s understandable, then, that some people might look at such lists, scope out the top ten companies on it, and assume that these companies are the best, healthiest, and most successful business entities in the world.
It’s possible, though, to inflate the market cap of a company in ways that don’t reflect a better, more profitable business.
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