What is Capitalization?
Capitalization refers to either:
- Capitalization – This is the process of funding a new venture.
- (Market Capitalization) the value of a company; it is the total amount of a company’s shares on the market or the total amount of assets that a company owns
- (Interest Capitalization) – mean how interest is paid on loans.
- (Cost Capitalization) – treating the cost of an asset as capitalized (rather than expensed).
What is Capitalization (Funding)?
Capitalizing a business is the process of acquiring assets to fund business operations.
What is Market Capitalization?
Market capitalization is the value of all shares of a company currently issued to shareholders (or traded in the market).
What is Interest Capitalization?
Capitalization is categorized into two depending on whether interest on loan is added to the initial capital or not. Granted, there are different formulas used to calculate capitalization. You need to understand these terms:
- Co- initial
- Cn capital in year n
- i Interest
- n Number of years
In simple capitalization, the interest is dependent on initial capital: Cn = Co = (1 + n (i)) In compound capitalization, interest earned is added each year to capital Cn = Co (1 + i)