Free-Float Methodology

The official name for the way we at Shmoop treat a vacation at the beach. Swimming is for suckers.

Also, it relates to methods of valuing a public company's worth.

A firm's market capitalization represents a common way of measuring its worth. Typically, you would calculate the figure by multiplying the firm’s current share price by the amount of shares it has outstanding.

The number you get represents the amount you’d need in order buy all the equity a company has (sometimes more than trillion dollars for the biggest companies, like Apple or Amazon...depending, of course, on its current share price).

Free-float methodology represents an alternative way to calculate the figure. Instead of using all the outstanding shares, the free-float method only counts shares currently available on the public market.

So instead of measuring the amount of cash needed to buy all the shares, it represents the total you’d need to buy all the shares you can easily get your hands on. Other shares (those held by family trusts, for instance, or company executives), are left out of the calculation.