Question

state three effects and three remedies of under capitalisation​

Answer 1

Under capitalisation may be remedied by increasing the par value of equity shares by revising upwards the value of assets. This will lead to decrease in the rate of earnings per share. As a further step, the company may offer shareholders a share split-up and an increase in par value.

Answer 2

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Increase in par value of shares:

Under capitalisation may be remedied by increasing the par value of equity shares by revising upwards the value of assets. This will lead to decrease in the rate of earnings per share. As a further step, the company may offer shareholders a share split-up and an increase in par value.