Capitalization is the transformation of funds into capital

Capitalization is the transformation of funds into capital
Capitalization is the transformation of funds into capital

Video: Capitalization is the transformation of funds into capital

Video: Capitalization is the transformation of funds into capital
Video: Capitalized Value - Engineering Economics Lightboard 2024, May
Anonim
capitalization is
capitalization is

Capitalization is a term with several meanings. But the process itself has as a result a single goal - an increase in income. The concept of capitalization is applicable not only for a particular company, but also for the industry as a whole, and even for all enterprises of a particular state. Yet the term is subdivided into four distinct meanings. Firstly, capitalization is the transformation of all profit or part of it into additional capital or additional reasons - means (objects) of labor, an increase in staff, and more. As a result, there is an increase in the mass of own funds. In other words, capitalization implies calculated and deliberate actions associated with the loss of the entire amount or part of it, which ultimately make it possible to acquire larger dividends than the existing ones. Secondly, it is an estimate of the capitalization of an individual company. It is calculated on the basis of current and fixed assets. Thirdly, it is the calculation of the value of the enterprise, based on the profit it receives annually.

capitalization estimate
capitalization estimate

Fourth, capitalization is the valuation of the firm,produced at the market value of its securities. This type implies the theory that the free market system is capable of taking into account all the circumstances that affect the price of the enterprise as a whole - in aggregate. That is, only at exchange auctions and it is possible to find out the real face value of the company. The calculation is quite simple: you need to multiply the exchange value of securities by their number. For example, a company issued 100 thousand shares, which during trading on the stock exchange went at a price of 100 rubles. By simple multiplication, we get the figure 10 million. It is she who is the market capitalization of this company. Among domestic enterprises, the leaders in this parameter are Rosneft, Gazprom, LUKOIL, Sberbank and Norilsk Nickel.

direct capitalization
direct capitalization

In banking, capitalization is the addition of the current rate of return on interest to capital, the issuance of bonds, shares and other methods of increasing the financial base. For example, capitalization of interest is a monthly or quarterly increase in the base amount from which dividends will be accrued in the next period. The capitalization of the stock market is considered separately. Here - this is the index of the scale of operations, or otherwise - the total market price of securities in circulation. There is also such a differentiation of this concept as direct capitalization. This is a way of transforming the annual income from the object directly into its value. That is, the price is no longer a simple face value, but the sum of real and possible profit. The purpose of this process is to generate periodic incomefrom funds invested in real estate.

Capitalization is a real tool that brings profit. But it works effectively only if the data involved in its calculation are true. In order for the information to be correct, in every company that uses this tool in one form or another, there are structures that deal with this issue.

Recommended: