define or explain "over captialization"?

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define or explain "over captialization"?

2006-07-24 10:33:00 · 2 answers · asked by Anonymous in Business & Finance ➔ Small Business

2 answers

To much capital raised (through paid up shares) relative to the trading size of the corp. for example I have sale of 1m dollars and at any point in time the company is owed 200,000 and owes 100,000 but has share capital of 10M$. The company is totally overcapitalised (has too much underperforming cash) sitting in the bank doing nothing. Not delivering shareholder value.

2006-07-24 10:38:14 · answer #1 · answered by Anonymous · 0⤊ 0⤋

Overcapitalization is a situation when a company has more money than it knows what to do with. Well-run overcapitalized companies tend to buy back stock and pay down debts. Poorly-run ones typically squander money on acquisitions.

2006-07-24 17:41:08 · answer #2 · answered by NC 7 · 0⤊ 0⤋