The document discusses capitalization levels in companies. It provides examples of a company being overcapitalized, with a 10% return on investment when the industry average is 20%, and undercapitalized, with a 30% return on an investment of Rs. 10 lakh when other companies need Rs. 15 lakh for a 20% return. Overcapitalization occurs when a company invests more funds than needed to generate its profits, while undercapitalization means not enough funds are invested given the level of profits.

2. CAPITALISATION

4. FAIR CAPITALISATION

5. OVER CAPITALISATION

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

7. UNDER 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

9. INDICATORS OF OVERCAPITALISATION