Today, the word “capitalization” can be heard quite often in economic news. Its main indicators are considered to be two: growth or decline.
There is an opinion among economists that the capitalization of a company is a kind of its value. It should be noted that these two indicators are in direct proportion. So, the higher the capitalization, the more expensive the company. With a decrease in capitalization, value is lost.
Capitalization of a company is the value of its shares on the stock exchange. For example, with an active purchase of shares, the value of the enterprise rises. An interesting feature of these securities is that the business entity itself has nothing to do with them. The only thing he can do is buy them back (often this is exactly what happens). Moreover, the shares may not be accompanied by the accrual of dividends. However, they are always a kind of "product."
The analysis showed a small number of studies in the field of capitalization. Basically, it is considered in terms of the growth of
equity of the enterprise. The main emphasis is placed on joint stock companies due to the presence of their shares in free float. Their value is estimated based on the
exchange rate differences of such securities.
The domestic market shows that the company's capitalization is an indicator that should be assessed based on foreign practice. Due to its limited scope, equity capital has not been widely distributed. Therefore, with this approach, it is likely that a substantial part of Russian enterprises will fall out.
Based on the research of domestic scientists (for example, E. Galtseva), a rating of companies capitalization is formed in the scientific literature, depending on various forms of its manifestation in the domestic market. So, based on the mechanism of increasing capitalization, we can distinguish three of its main forms (real, subjective and fictitious (market)). All these forms should be necessarily reflected in the third section of the balance sheet as an increase in own sources for financing. Moreover, they have different sources of origin and initiation. Let us dwell on each form.
Real capitalization of the company
This is a reflection in the reporting of the natural result of its financial and economic activities. So, an efficiently operating enterprise always has a positive result from its core business. Increasing the company's capitalization shows its ability to generate its income with the subsequent expansion of the business and obtaining higher profitability in the future.
Subjective capitalization
In this case, this economic indicator is controlled by internal management. Valuation of intangible assets are subjective (contractual) in nature. Therefore, an increase in the value of property can be considered a subjective operation, since capitalization formed in this way can disappear at any time (changes in the market or political situation in the country).
Fictitious (market) capitalization
A company's capitalization is its market value, which is represented by the product of the price of the shares and their total number (R. Koch). The growth of such value is reflected in the balance sheet (in the asset). The main difference between this form of capitalization and the previous one is that initiation is carried out not by internal management, but by external structures that carry out stock quotes on the stock exchange.