What are the indications of existence of undercapitalization in a company?

What are the indications of existence of undercapitalization in a company?


Undercapitalization is when the actual capitalization is lower than its proper capitalization as it is given by its earning capacity. Undercapitalization is indicated by the condition above and when the rate of earning is very high in effect to the returns which other companies get which are in the same industry as others. This is also indicated when a company does not have sufficient capital to conduct normal business operations and they have to pay the people from whom they have taken. When a company doesn't generate enough cash flow to access the forms then it is said to be undercapitalized.
What remedies are available for companies to overcome undercapitalization?
Remedies are the solutions which are available for the companies to overcome the problem of undercapitalization this can be done by using two factors. These factors are as follows…
What are watered stock / watered capitals? What are the reasons which lead to this situation?
Watered stock/capital is that stock which is issued with a value much higher than the value of assets which a company ow…
Compare Overcapitalization & undercapitalization
Overcapitalization is a state where earnings are not sufficient to justify the fair return on the amount of share capital which …
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