Can you please explain the difference between Overcapitalization & undercapitalization?
Submitted by: Administrator- Overcapitalization is a state where earnings are not sufficient to justify the fair return on the amount of share capital which has been issued by the company whereas undercapitalization is a state where the capital which is owned by the business is much less than the borrowed capital.
- Overcapitalization happens when the actual profits of a company are not enough or sufficient to pay interest to the creditors whereas undercapitalization happens due to over-trading and when the company earn high profits as compared to other industry.
- Overcapitalization shows the rate of return as declining entity whereas undercapitalization shows the rate of return as increasing entity.
Submitted by: Administrator
- Overcapitalization happens when the actual profits of a company are not enough or sufficient to pay interest to the creditors whereas undercapitalization happens due to over-trading and when the company earn high profits as compared to other industry.
- Overcapitalization shows the rate of return as declining entity whereas undercapitalization shows the rate of return as increasing entity.
Submitted by: Administrator
Read Online Capitalization Job Interview Questions And Answers
Top Capitalization Questions
☺ | Explain Cost Theory? |
☺ | Tell me what is over capitalization? What are its causes? |
☺ | Explain Earnings Theory? |
☺ | Do you know what is capitalization? What is its importance? |
☺ | Do you know the theories to determine the amount of capitalization? |
Top Finance and Accounts Categories
☺ | MBA Finance Interview Questions. |
☺ | Bank Teller Interview Questions. |
☺ | Capital Market Interview Questions. |
☺ | Bank Reconciliation Interview Questions. |
☺ | Cashier Interview Questions. |