Capitalization is a term that has several meanings. But the process itself has as a result a single goal - increasing revenue. The concept of capitalization is applicable not only to a particular company, but also to the industry as a whole, and even to all enterprises of a particular state. Nevertheless, the term is divided into four separate meanings. First, capitalization is the transformation of all or part of the profit into
additional capital or additional reasons - means (objects) of labor, an increase in the staff of employees, and more. As a result, there is an increase in the mass of
equity. In other words, capitalization implies calculated and deliberate actions associated with the loss of the entire amount or part thereof, which in the end allows you to acquire greater dividends than existing ones. Secondly, this is an assessment of the capitalization of an individual company. It is calculated on the basis of current and
fixed assets. Thirdly,
it is the calculation of the value of the enterprise, based on the profit that it receives annually.
Fourthly, capitalization is the valuation of a firm made at the market value of its securities. This type implies the theory that a free market system is capable of taking into account all the circumstances that affect the price of an enterprise as a whole - in aggregate. That is, only at the exchange trading and it is possible to find out the real face value of the company. The calculation is quite simple: you need to multiply the exchange value of securities by their number. For example, a company issued 100 thousand shares, which at the time of trading on the stock exchange were priced at 100 rubles. By simple multiplication we get the figure of 10 million. It is she who is the market capitalization of this company. Among domestic enterprises, Rosneft, Gazprom, LUKOIL, Sberbank and Norilsk Nickel are leaders in this parameter.
In banking, capitalization is the addition to capital of the current
rate of interest
income , the issuance of bonds, stocks and other methods of increasing the financial base. For example, interest capitalization is a monthly or quarterly increase in the base amount with which dividends will be accrued in a subsequent period. Separately consider the capitalization of the stock market. Here - this is an index of the scale of operations, or otherwise - the total
market price of securities in circulation. There is still such a differentiation of this concept as direct capitalization. This is a way of transforming the annual income from an object directly into its value. That is, the price is no longer a simple face value, but the sum of real and possible profit. The purpose of this process is to obtain periodic income from funds invested in real estate.
Capitalization is a real-life tool that makes a profit. But it works efficiently only if the data involved in its calculation are true. In order for the information to be true, in every company that uses this tool in one form or another, there are structures that deal with this issue.