Question

Condition of over, under
and watered capitalisation​

Answer 1

Answer:

A company may start with watered capital but its working may be very efficient and its earnings may justify the amount of capitalisation. ... Over-capitalisation may be caused by low earnings, existence of idle capital and factors other than the existence of watered capital.

Answer 2

Explanation:

A company is said to be overcapitalized when the aggregate of the par value of its shares and debentures exceeds the true value of its fixed assets.In other words, over capitalisation takes place when the stock is watered or diluted. ... Overcapitalisation does not mean surplus of funds.

A company may start with watered capital but its working may be very efficient and its earnings may justify the amount of capitalisation. ... Over-capitalisation may be caused by low earnings, existence of idle capital and factors other than the existence of watered capital.

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