1. Shares represent ownership of companies of various sizes. Understanding the relationship between company size, return potential, and risk is important in developing a long-term investment strategy. With this knowledge, you are ready to build a balanced equity portfolio that combines market capitalization. Companies are typically categorized into one of three major groups, large caps, mid-caps, and small caps, based on their size. Cap is an abbreviation for market capitalization and represents the value of a company in the open market. The definition of market capitalization can be different, so the following are general guidelines. Large Cap: Market value of over $ 10 billion. It is usually a well-known company that has matured in an established industry. Midcap: Market value of US $ 3 billion to US $ 10 billion. A well-established company in the industry that is usually experiencing or anticipating rapid growth. Small cap: Market value of less than $ 3 billion. Usually a young company serving niche markets and emerging industries. To calculate the market capitalization of a company, multiply the current price of that share by the total number of issued shares. For example, if a company issues 1 million shares for $ 50 each, its market capitalization is $ 50 million ($ 50 x 1,000,000 shares). Assessment of risk and reward potential. In general, market capitalization corresponds to a company's stage of business development. Investing in large-cap stocks is generally considered to be more conservative than investing in small-cap and medium-cap stocks. This is because the risk may be lower at the cost of lower growth potential. Conversely, mid-caps are generally somewhere between large and small caps in the risk / return spectrum. Midcap may be in the process of increasing market share and improving overall competitiveness. This stage of growth may ultimately determine whether a company will reach its full potential. Medium-cap stocks are usually between large-cap and small-cap stocks in the risk / return spectrum. Midcaps have the potential to offer more growth potential. Therefore, mid-caps may have a higher growth potential than large caps. Due to the relatively limited resources of small businesses, equities can be more vulnerable to business and economic downturns, as well as fierce competition and untested market uncertainties. May be. Small caps, on the other hand, can offer significant growth potential to long-term investors who can withstand short-term fluctuating price fluctuations. The standard way to measure the performance of an investment is to measure the return on the return of an index that represents a similar investment. Like stocks, indexes come in all sizes and shapes. Standard & Poor`s (S & P) 500 is the most well-known indicator of large cap stocks. As the name implies, the S & P Medium Cap 400 and S & P Small Cap 600 Index represent medium and small caps, respectively. Russell 2000 is another prominent indicator of small cap stocks. Over time, large-cap, mid-cap, and small-cap stocks alternate at the top of the market, as they can be affected differently by market and economic development. As a result, many investors diversify and maintain a portfolio of market capitalization combinations. As the value of the large cap decreases, the small or mid cap increases and can help offset the loss. To build a portfolio with the right mix of small, medium and large cap stocks, you need to evaluate your financial goals, risk tolerance, and duration. A diverse portfolio, including a wide variety of market capitalizations, reduces investment risk in all areas and helps you pursue long-term financial goals. Keep in mind that diversification does not eliminate the risk, nor does it eliminate the risk of potential loss. Explain in details why market capitalization matters from the case above?

2. Alexander, a private equity investor, said that Eston could report a surprising earnings surprise as demand for natural gas pipes surges in connection with the surge in US shale gas production. Keep an eye on the news. To make an investment decision based on price-earnings ratio, Alexander selects PER (Price Earnings Ratio), which is calculated as follows. Stock price of PER Togoku Co., Ltd. per share. (November 1, 2019) / Mr. Alexander selected five companies in the same industry as Togoku Co., Ltd. to compare net income per share in FY2019. These are similar company sizes, and the average P / E is calculated based on the above formula. As a result, Alexander has acquired multiples of 15 in the East, with an average multiple of 12 for these five companies. Based on this multiple comparison, Alexander concluded that the stock market is a stock of Togoku Co., Ltd. Invest in Eston stock at a high price. Requirement 1: If you are a financial analyst, what is your advice for investing in Alexander? (12 points) Requirement 2: The above price multiple comparison method has not only conceptual problems but also implementation problems. Include one for implementation and conceptual issues.

3. What functions do different strategy of business play in terms of the market capitalization of a company's growth? What are the roles do a company's core capabilitiesplay in deciding to enlarge into new venture areas? Why do irrelevant variegation have worse track record than related variegation?