How is market capitalization calculated?

Market capitalization is calculated by determining the total market value of a company's outstanding shares of stock. This is done by multiplying the current share price by the total number of shares that are outstanding in the market. The result provides investors with an indication of the company's total value as perceived by the market. This measure is crucial for various analyses, including comparing companies within the same industry, as it reflects the overall size and investment potential of a company.

The other options presented do not relate to the calculation of market capitalization. For instance, the number of employees multiplied by sales does not give any insight into the company’s market value and instead focuses on operational metrics. Total revenue minus total expenses relates to the company’s profitability, not its market value. Similarly, net income divided by the company’s liabilities focuses on the firm's financial stability rather than its market capitalization. Thus, the option regarding the total market value of outstanding shares accurately encapsulates the definition and calculation of market capitalization.