What happens with a companies capital?

Lacanau

Junior member
35 0
Gday to all.

I've just recently started an account on this forum in the hopes of learning more about the ins and outs of trading. I have done some in the past (over months) and feel I want to start taking it more seriously. However my knowledge on the subject as a whole is quite limited. So I have some basic questions I want to ask from time to time as I have received no formal training and wish to understand more.
Could anyone tell me what companies usually do with their market capital? Is it reinvested? I see some of the big named companies have huuge capital. Or is it just how much the company has at its disposal to use on expansion, R&D, etc...

Thanks all, glad to be here :cheesy:
 

eighteen

Active member
187 23
Market Cap, is the sum of all the existing shares *'s the price of the stock. So a company has 10 shares priced 2$ each so its market cap would be 20$. This doesnt mean the company actually has the capital, its just how much the entire company would cost, to see the amount of money a company actually has you have to look through the balance sheet, usually companies explain where they will spend the money, market capital and working capital are parrallel conscepts.
 

Lacanau

Junior member
35 0
Market Cap, is the sum of all the existing shares *'s the price of the stock. So a company has 10 shares priced 2$ each so its market cap would be 20$. This doesnt mean the company actually has the capital, its just how much the entire company would cost, to see the amount of money a company actually has you have to look through the balance sheet, usually companies explain where they will spend the money, market capital and working capital are parrallel conscepts.

When you say all existing shares, does that include shares that are owned and unowned? Does it include preffered shares as well? Also, when you say "it's just how much the entire company would cost" Does this mean that the market capital represents the value of company as viewed by the market? Because I imagine this will almost always vary from its book value then.
Thanks for the reply :cheesy:
 

eighteen

Active member
187 23
it doesnt include preffered stock, it includes all shares, unowned and owned is a bit of a misnomer really because even when shares are being sold they still have an owner. It will almost always vary from the book value (if you can calculate that, quite difficult really, hence why analysts disagree on everything) its what the entire stock is worth at anyone time, so you can use it to see if a company is undervalued by your estimate.
 

Lacanau

Junior member
35 0
it doesnt include preffered stock, it includes all shares, unowned and owned is a bit of a misnomer really because even when shares are being sold they still have an owner. It will almost always vary from the book value (if you can calculate that, quite difficult really, hence why analysts disagree on everything) its what the entire stock is worth at anyone time, so you can use it to see if a company is undervalued by your estimate.

Ok I see. So it provides a snapshot of how much a company is worth to the market.
Out of curiosity, when a company issues new shares, who owns them initially? And what happens to the shares that aren't bought upon the date of issue? Or is there a timeframe involved?
Also, how long does it take to affect a company's capital figure? Or does this happen immediately upon purchase?
Pardon the ignorance, I'm just very keen to understand :)
 
 
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