Definition of 'Free-Float Methodology'
The free-float methodology is used by many investors and analysts because it is believed to provide a more accurate picture of the value of a company. This is because the shares that are available to the public are the ones that are most likely to be traded, and therefore have the most impact on the stock price.
To calculate the free-float market capitalization, you first need to determine the number of shares that are available to the public. This can be done by subtracting the number of shares held by insiders and institutions from the total number of shares outstanding.
Once you have the number of shares that are available to the public, you can multiply that number by the current share price to get the free-float market capitalization.
The free-float methodology is not without its critics. Some argue that it is not a true measure of the value of a company because it does not take into account the potential value of shares that are held by insiders or institutions.
However, the free-float methodology is still widely used by investors and analysts because it is believed to provide a more accurate picture of the value of a company than the total market capitalization.
Here are some additional points about the free-float methodology:
* The free-float market capitalization is often used to compare the size of different companies.
* The free-float market capitalization can also be used to track the performance of a company over time.
* The free-float market capitalization is a key factor in determining the price-to-earnings ratio of a company.
Overall, the free-float methodology is a valuable tool for investors and analysts who want to get a more accurate picture of the value of a company.
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