Question

Explain the concept of over capitalisation in indian agriculture

Answer 1

Answer:

Overcapitalization occurs when a company has issued more debt and equity than its assets are worth. The market value of the company is less than the total capitalized value of the company. An overcapitalized company might be paying more in interest and dividend payments than it has the ability to sustain long-term. The heavy debt burden and associated interest payments might be a strain on profits and reduce the amount of retained funds the company has to invest in research and development or other projects. To escape the situation, the company may need to reduce its debt load or buy back shares to reduce the company's dividend payments. Restructuring the company's capital is a solution to this problem.

Answer 2

Concept of over capitalisation in indian agriculture:

• Over-capitalization takes place when a company has given more debt and equity than its assets are worth.
• The "market value" of the company is smaller than the "total capitalized value" of the company.
• An overcapitalized company might be paying high in interest and dividend payments than it can sustain long-term.
• To outbreak the situation, the company may need to decrease its debt load or buy back shares to minimize the company's dividend payments.
• Restructuring the "company's capital" is a solution to solve this problem.

To know more;

Difference between over capitalisation and under capitalisation in financial management

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