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 ?
H1: There is no negative and significant relationship between quality of financial reporting and overcapitalization.
Given the extent of overcapitalization and wasted effort in most fisheries under traditional management, it should be possible to compensate potential losers from the gains generated by reform.
In a keynote address at the Advisen Casualty Insights Conference May 1 in New York, Mark Lyons, chief executive officer of Arch World Wide Insurance Group said overcapitalization is hiding losses on business.
One specific issue that has sparked much attention is the overcapitalization of the electric utility industry--that is, electric utilities hold a quantity of capital that is greater than the cost-minimizing quantity.
055% (10% WACC multiplied by the overcapitalization factor of 1.
Government subsidies have contributed to modernization and overcapitalization of fleets, which have resulted in the downward spiral of marine ecosystems.
Consumers will also experience effects from industry consolidation to correct overcapitalization and the resulting market failure of allocative inefficiency (more than optimum resources in the industry).
For overcapitalization to happen over time, as predicted in most management models, the possibility to accrue capital needs to exist.
As complex as the crisis of America's fisheries may seem, it can be broken down into three basic problems: destruction of fish habitat, overcapitalization of the industry, and built-in conflict of interest in fisheries management.
The l990s' fiercely competitive market was one of history's longest, a consequence of severe overcapitalization.