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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. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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