capitalize

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Capitalize

In accounting, to recognize expenses on long-term liabilities over a long period of time. This allows a company to spread out its expenses so they do not appear to reduce profits at any particular time. For example, a company may have a $1 million profit and a $1 million loan to acquire machinery for its factory. If it does not capitalize the loan, its balance sheet will show no profit for that year. Capitalizing the loan allows the company to recognize the liability over a certain period, usually the usable life of the machinery.

capitalize

To calculate the current value of a future stream of earnings or cash flows. For example, to calculate the current price at which a bond should sell, a financial analyst must capitalize the interest payments and principal repayment that will be made to the investor.

capitalize

(1) In finance:(a) To add an expenditure to the basis of property.(b) To provide funding to an enterprise. (c) To book something as an asset and depreciate it rather than writing off the money spent as an expense.(When one “cooks the books”for a business,extensive repairs might be capitalized as improvements in order to make the enterprise appear more valuable than it is in reality.This approach runs counter to the normal taxpayer desire to treat all repairs as expenses in order to gain maximum tax deductions in the current year.) (2) In appraisal,to estimate the present value of an income stream from a business or property.

Capitalize

To treat the cost of additions and improvements to property as a capital improvement or expenditure.
References in periodicals archive ?
Before trial, the IRS had allowed a deduction for accumulated interest and loss on disposal of some acquisition assets and ITW agreed to capitalize its original $1 million damage estimate.
Thus, the Tax Court said ITW should capitalize the judgment "whether or not such obligation was fixed, contingent, or even known at the time such property was acquired.
The Tax Court's use of Webb should not lead CPAs to conclude clients should capitalize all benefit payments that take into account preacquisition service.
If a transferee pays an assumed liability, it may have to capitalize it (see Holdcroft Transportation Co.
For taxpayers the answer is probably easier when the claim is for the total destruction of a business--lost profits are a common way to capitalize the entity's value (as in Durkee and Raytheon).
By combining our core competencies with those of Cap Gemini, we believe that we are well positioned to capitalize on the confluence of economic, technological and competitive factors that are re-shaping our industry.
Shields, Co-President and Co-Chairman of EMMC, continued, "We believe that our initial western European rollout will position EMCC to capitalize on an untapped, burgeoning marketplace.
The two-tiered master reseller arrangement with BTG allows us to capitalize on their mass-marketing expertise, offering government channel partners and customers at all levels an additional source for Informix products," Hammersla added.
Knowing this, we expect our skill position players to recognize and capitalize on a numbers advantage as soon as it appears.
We also seek to capitalize on positive numbers in the "tackle box" (Diag.
This has become is a must for us, so that come game time our offensive personnel will recognize and capitalize on anything the defense gives us.