Market value is commonly used to refer to the market capitalization of a publicly-traded company.
Market value is obtained by multiplying the number of its outstanding shares by the current share price. Market value is the price an asset would fetch in the marketplace. A company’s market value is a good indication of investors’ perceptions of its business prospects. The range of market values in the marketplace is enormous, ranging from less than INR 500 crores for the smallest companies to millions for the larged sized an successful companies.
Market value is easiest to determine for exchange-traded instruments such as stocks and futures, since their market prices are widely disseminated and easily available, but is a little more challenging to ascertain for over-the-counter instruments like fixed income securities.
However, the greatest difficulty in determining market value lies in estimating the value of illiquid assets like real estate and businesses, which may necessitate the use of real estate appraisers and business valuation experts respectively.
The market value (MV) of a company is calculated using the following formula:
MV of a Company = No. of outstanding shares * Market Price per share
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Market value is determined by the valuations or multiples accorded by investors to companies, such as price-to-sales, price-to-earnings, enterprise value-to-EBITDA, and so on. The higher the valuations, the greater the market value.