Re:How Can Yahoo Be Worth Less Than Zero?
by mikeash on Friday April 18, 2014 @12:03PM
(#7609705)
That might technically be what the word means, but the implication is that this is what the company as a whole is worth, and that's not necessarily true.
A stock's price is essentially the first derivative (in calculus terms) of the company's value. Market cap is essentially assuming that the entire thing is linear, by taking the derivative and multiplying it by the total size. Stocks don't behave linearly, so this assumption isn't particularly good.
A stock's price is essentially the first derivative (in calculus terms) of the company's value. Market cap is essentially assuming that the entire thing is linear, by taking the derivative and multiplying it by the total size. Stocks don't behave linearly, so this assumption isn't particularly good.