Capitalization

AAA

DEFINITION of 'Capitalization'

1. In accounting, it is where costs to acquire an asset are included in the price of the asset.

2. The sum of a corporation's stock, long-term debt and retained earnings. Also known as "invested capital".

3. A company's outstanding shares multiplied by its share price, better known as "market capitalization".

INVESTOPEDIA EXPLAINS 'Capitalization'

1. For example, if a machine has a price of $1 million this value would be recorded in the assets, if there was also a $20,000 charge for shipping the machine then this cost would be capitalized and included in assets.

2. The capitalization of a firm can be overcapitalized and undercapitalized, both of which are potential negatives.

3. If a company has 1,000,000 shares and is currently trading at $10 a share, their market capitalization is $10,000,000.

VIDEO

Loading the player...
RELATED TERMS
  1. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  2. Capitalization Of Profits

    Converting a company's retained earnings, which represent the ...
  3. Reconstitution

    A reevaluation of a market index that involves adding and removing ...
  4. Commodity Credit Corporation - ...

    An agency of the U.S. Department of Agriculture. The Commodity ...
  5. Long-Term Debt

    Loans and financial obligations lasting over one year. Long-term ...
  6. Market Capitalization

    The total dollar market value of all of a company's outstanding ...
RELATED FAQS
  1. What is the best managed fund for trading mid-cap stocks?

    Mid-cap stocks have a moderate capitalization and are officially valued between $1 billion and $8 billion. Actively managed ... Read Full Answer >>
  2. How does transfer pricing help business?

    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>
  3. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  4. How important are contingent liabilities in an audit?

    Contingent liabilities, when present, are very important audit items because they normally represent risks that are easily ... Read Full Answer >>
  5. How does quantifying fixed overhead volume variance show whether a company is profitable ...

    Fixed overhead volume cannot definitively prove a company is profitable, but it can be used to provide an excellent indication ... Read Full Answer >>
  6. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
Related Articles
  1. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  2. Insurance

    Market Capitalization Defined

    Find out the differences between mega-, large-, mid- and small-cap stocks and how each suits different investing styles.
  3. Trading Strategies

    Small Caps Boast Big Advantages

    Find out why little companies have the greatest potential for growth.
  4. Options & Futures

    Find Quality Investments With ROIC

    Return on invested capital is a great way to measure the true value produced by a company. Learn to use the ROIC metric and increase your chances of finding successful investments.
  5. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  6. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  7. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  8. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.
  9. Fundamental Analysis

    Is it Wise to Diversify with Small-Caps?

    Historically, it's always been a good idea to add small-caps to your portfolio. But doing so right now will require more focus and attention.
  10. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center