Question

Difference between over capitalization and under capitalization

Answer 1

Answer:

Over Capitalisation:-

• A company can be said as over capitalised when it's actual capitalisation is higher than its proper Capitalisation.
• This situation happens in a company which has high funds but lower earnings.

Under Capitalisation:-

• A company is said to be under capitalised even it's actual capitalisation is lower than its proper Capitalisation.
• This happens in case of companies which are well established but have insufficient capital, but large secret reserved which are never brought to knowledge.