what is capitalization and its bases? Explain the concept of over-capitalization in detail.
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Explanation:
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.
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In accounting, capitalization occurs when a cost is included in the value of an asset.
Explanation:
Capitalization is an accounting method in which a cost is included in the value of an asset and expensed over the useful life of that asset, rather than being expensed in the period the cost was originally incurred.
In finance, capitalization or book value is the total of a company's debt and equity.
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.
#Learn more:
Differentiate between fixed and working capital.
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