Overcapitalization

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Overcapitalization

Said to occur when a firm cannot service its debt even though its debt/equity ratio is not excessive.

Overcapitalization

A situation in which a company has too much capital. An overcapitalized company has an excessive amount of cash or liquid assets; it may find itself in a position, for example, of paying high dividends that it would have difficulty reducing in the future. Its earnings may or may not adequately reflect the capital invested in the company. An overcapitalized company may repay its debt or make a tender offer for shares in order to reduce its capital.
References in periodicals archive ?
Based on the results of investment efficiency variable which represents the investment efficiency of sample companies; includes the negative and positive figures that based on our model of research, positive figures represent over-capitalization and negative figures represent undercapitalization.
The results for over-capitalization model in above table shows that the mentioned model could not obtained the primary condition of regression.
H0: The relationship between the quality of financial reporting and over-capitalization are not affected by the size of the company.
improper sales cut-off -- fixed assets lives -- accounting for certain contracts -- over-capitalization of engineering costs & material handling costs in both inventory and internally constructed fixed assets -- non-consolidation of investment in subsidiary -- accounting for treasury stock -- inventory obsolescence -- the improper application of percentage of completion accounting -- understatement of warranty liabilities -- improper capitalization of litigation settlement -- over-capitalization of investment in a subsidiary