Difference Between Capitalization and Capital Structure

Difference Between Capitalization and Capital Structure



(#) Capitalization 

* Capitalization means amount of capital invested in a business .

* Capitalization is used in the case of companies only .

* Capitalization includes all the sources of fund used in an organization .  

------> " The term capitalization or the valuation of the capital includes the capital stock and debts "

* "Capitalization " has been derived from the term ' capital ' . Capitalization is used in relation to companies and not in partnership from of sole business . 


*Capitalization  = Share capital + Preferential share capital  


 (#) Capital Structure

------> " Capital Structure is qualitative term that gives the ratio in which the total capital is contributed by different sources"

* Capital Structure may be high geared or low geared

* Capital Structure influenced by external factors .

* Capital Structure is a proportion of debts and equity in the total capital of a company.

 -- Debts such as all borrowings from government , semi government  and other agencies , loan from bank , debenture , etc .

-- Equity such as equity  share capital , Preferential share capital , contingency reserve  , surplus profit and other .

* Capital Structure denotes mix of owners' funds and outsider's fund




















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