After reading this article you will learn about the Under-Capitalisation:- 1. Meaning of Under-Capitalisation 2. Causes of Under-Capitalisation 3. Effects 4. Remedies. Meaning of Under-Capitalisation: In the words of Gersrtenberg, "A company may be under-capitalised when the rate of profits it is making on the total capital is exceptionally high in relation to the return enjoyed by similarly situated companies [...]
Capitalisation is an important constituent of the financial plan of a business. In common parlance, the term 'capitalisation' refers to the total amount of capital employed in a business. In its broad sense, the term 'capitalisation' refers to the process of determining the quantum and patterns of financing. It includes the determination of not only the total quantity of capital [...]
This article will help you to differentiate between Over-Capitalisation and Under-Capitalisation. 1. Over-capitalisation involves a great-strain on the financial resources of a company whereas under-capitalisation implies high rate of earnings on its shares. 2. The remedial procedure of over-capitalisation is more difficult and expensive as compared to the remedial procedure of under-capitalisation. 3. Under-capitalisation accelerates cut-throat competition amongst companies; results [...]