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.
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