ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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INCOME CAPITALIZATION Definition
INCOME CAPITALIZATION: First you must determine the capitalization rate - a rate of return required to take on the risk of operating the business (the riskier the business, the higher the required return). Earnings are then divided by that capitalization rate. The earnings figure to be capitalized should be one that reflects the true nature of the business, such as the last three years average, current year or projected year. When determining a capitalization rate you should compare with rates available to similarly risky investments.
Learn new Accounting Terms
DEFICIT is a debit balance in the Retained Earnings account resulting from accumulated losses.
FLOTATION COST is the percentage cost of issuing new common stock.