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TeachMeFinance.com - explain capitalization Capitalization -- Adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan.
capitalization -- (1) the value of authorized or outstanding shares of stock or bonds in a business firm. (2) the process of adding earned but uncollected interest to the loan balance, a practice prohibited in some states. (3) a method of estimating the present value of future income. (4) the total value of an owner's investments in a business.
historic definition... Capitalization -- Placing a value on and creating something to represent that value. For instance, the capitalization of a business consists in placing a value on it and then issuing stock to represent that value. Bonds in contradistinction to stock represent an indebtedness. Tt is a common practise, however, to speak of the amount of the bonds of a company and the amount of its stock, both added together, as the capitalization of the company as the amount for which it is capitalized. Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer. |