August 21, 2019

What are the causes of Over Capitalisation?

Causes of over capitalisation

  1. Over issue of capital
  2. Promotion, formation or development during inflation.
  3. Buying assets of lower value at higher prices.
  4. High promotion expenses – preliminary expenses.
  5. Inadequate depreciation – leaves insufficient provision for replacement of assets.
  6. Liberal dividend policy –
  7. Taxation policy – high tax rates
  8. Inadequate demand for products – bring down the profitability
  9. Payment of high rate of interest
  10. Under estimation of capitalisation rate

Leave a Reply

Your email address will not be published. Required fields are marked *