INCOME CAPITALIZATION Definition

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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.

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BONA FIDE GUARANTY covers a specific element of a secured transaction, for example, the integrity of receivables or the accuracy of inventory count.

WORKING ASSET STATEMENT is a net worth statement minus any personal assets, the car, house, boat, etc. A working asset statement will give a clear picture of an individuals invested assets.

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