Write a note on Undercapitalization
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Under capitalisation is the condition where real value of the company is more than its book value..
The assets brings profits but it would appear to be much larger than warranted by book figures of the capital..
In such a cases, dividend will naturally be high and the market value of shares also much higher
It doesn't means inadequacy of capital
Profits are high in such countries and a part of profits are plughback in profits directly and indirectly
The assets brings profits but it would appear to be much larger than warranted by book figures of the capital..
In such a cases, dividend will naturally be high and the market value of shares also much higher
It doesn't means inadequacy of capital
Profits are high in such countries and a part of profits are plughback in profits directly and indirectly
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Answer:
Undercapitalization occurs when a company does not have sufficient capital to conduct normal business operations and pay creditors.
- Undercapitalized companies also tend to choose high-cost sources of capital, such as short-term credit, over lower-cost forms such as equity or long-term debt.
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