How to Calculate Market Capitalization Rate

Determination of the market capitalization rate is essential before you make decision to invest in the market. By determining overall market capitalization and its rate, you can help yourself find the capitalization rate of the company or property you are trying to invest in. Market capitalization changes on a daily basis as shares keep on exchanging hands and their value also fluctuates. If you want to calculate rate for the overall capitalization, do it at closing of the market or else you can take an average during any time of the day.

Instructions

  • 1

    Determine Rate of Return

    First of all you will need to determine the rate of return you desire on your investment in the market, and the factors that are taking their effects on the market. For example if you are making about a 10 per cent gain on your capital in the market, you can know how you can increase this rate to even better.

  • 2

    Study Financial Disclosures

    To know how your investment is doing or how can you improve return on the capital, you should be analyzing financial disclosures of the company that you have invested in. The financial statement can give you an idea what factors are affecting the company's market price and its profitability.

  • 3

    Determine Worth of Return

    Once you are aware of the factors and know the overall situation of the company's shares that you have invested in, you can decide the nature of the rate of return you are getting on your capital. If not, you can either diversify your investment into other areas in the same sector or switch to a sector that is performing better. Be assured that the capitalization rate does not take a count of debt and other assets of the company.

  • 4

    Seek Professional Advice

    If you are unable to determine whether the rate of return you are getting is a good one, you can seek an advice from a brokerage house or an independent analysts. Sometimes you might get charged for the services; however, many services are available for free if they find a genuine investment potential from a person.

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