Overview

overcapitalization


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A condition in which an organization has too much capital for the needs of its business. If a business has more capital than it needs it is likely to be overburdened by interest charges or by the need to spread profits too thinly by way of dividends to shareholders. Businesses can now reduce overcapitalization by repaying long-term debts or by buying their own shares. Compare undercapitalization.

Subjects: Financial Institutions and Services — Accounting.


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