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Capitalisation

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Byju Antony

XII BUSINESS STUDIES

Education
1 of 11
CAPITALISATION
FAIR CAPITALISATION
OVER CAPITALISATION
• PROFIT OF A COMPANY FOR THE YEAR 2012 -13= 1,00,000 • TOTAL INVESTMENT OF THE COMPANY = 10,00,000 • % OF RETURN OF THIS COMPANY = 10%(1,00,000X100/10,00,000) • AVERAGE RATE OF RETURN IN THE SAME INDUSTRY = 20% • THAT IS FOR MAKING A PROFIT OF RS.1,00,000 OTHER COMPANIES NEED TO INVEST ONLY RS.5,00,000.BUT THIS COMPANY INVESTED RS.10,00,000 • THIS INDICATES THE COMPANY IS OVERCAPITALISED OVER CAPITALISATION
UNDER CAPITALISATION
• PROFIT OF A COMPANY FOR THE YEAR 2012 -13= 3,00,000 • TOTAL INVESTMENT OF THE COMPANY = 10,00,000 • % OF RETURN OF THIS COMPANY = 30%(3,00,000X100/10,00,000) • AVERAGE RATE OF RETURN IN THE SAME INDUSTRY = 20% • THAT IS FOR MAKING A PROFIT OF RS.3,00,000 OTHER COMPANIES NEED TO INVEST RS.15,00,000.BUT THIS COMPANY INVESTED ONLY RS.10,00,000 • THIS INDICATES THE COMPANY IS UNDER CAPITALISED UNDER CAPITALISATION
INDICATORS OF OVERCAPITALISATION
Capitalisation
Capitalisation

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Capitalisation

  • 1.
  • 3.
  • 6. • PROFIT OF A COMPANY FOR THE YEAR 2012 -13= 1,00,000 • TOTAL INVESTMENT OF THE COMPANY = 10,00,000 • % OF RETURN OF THIS COMPANY = 10%(1,00,000X100/10,00,000) • AVERAGE RATE OF RETURN IN THE SAME INDUSTRY = 20% • THAT IS FOR MAKING A PROFIT OF RS.1,00,000 OTHER COMPANIES NEED TO INVEST ONLY RS.5,00,000.BUT THIS COMPANY INVESTED RS.10,00,000 • THIS INDICATES THE COMPANY IS OVERCAPITALISED OVER CAPITALISATION
  • 8. • PROFIT OF A COMPANY FOR THE YEAR 2012 -13= 3,00,000 • TOTAL INVESTMENT OF THE COMPANY = 10,00,000 • % OF RETURN OF THIS COMPANY = 30%(3,00,000X100/10,00,000) • AVERAGE RATE OF RETURN IN THE SAME INDUSTRY = 20% • THAT IS FOR MAKING A PROFIT OF RS.3,00,000 OTHER COMPANIES NEED TO INVEST RS.15,00,000.BUT THIS COMPANY INVESTED ONLY RS.10,00,000 • THIS INDICATES THE COMPANY IS UNDER CAPITALISED UNDER CAPITALISATION