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Finance Glossary

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Over 700 finance terms, Shmooped to perfection.

Equity Capitalization


Equity cap refers to the total value of an equity market. You add up the market capitalization of all the companies in a market and—ta-da!—you have the equity capitalization.

And what can you do with this big number? Well, if you like numbers, you can stare at it and enjoy it that way. Most likely, you're going to compare it to the past equity capitalization rates for the market to see how the market's doing. Or maybe you'll compare it to other markets (like the real estate market) because you're considering where to make your investment.

Basically, equity cap usually refers what investors are paying for a company's earnings power; i.e., "ignore the cash on the balance sheet" calculation.