The term "cap", as in large cap fund or small cap fund, is referring to market capitalization (Market Cap) which measures a business’s value based on share price and the number of shares outstanding. It generally represents the market's view of a company’s stock value and is a determining factor in stock valuation.
For example, if a company has 1.2 million shares outstanding at a share price of $35, its market cap is $42 million (1.2 million x $35). Companies can be categorized based upon the size of their market capitalization..
There are five basic groups: mega-cap (market cap over $200B), large-cap ($10B–$200B), mid-cap ($2B–$10B), small-cap ($300M–$2B), and micro-cap ($50M-$300M). Market cap is not always an accurate indication of value because it does not account for debt and other factors.
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