cap·​i·​tal·​i·​za·​tion | \ ˌka-pə-tə-lə-ˈzā-shən How to pronounce capitalization (audio) , ˌkap-tə-\

Definition of capitalization

1a : the act or process of capitalizing
b : a sum resulting from a process of capitalizing
c : the total liabilities of a business including both ownership capital and borrowed capital
d : the total par value or the stated value of no-par issues of authorized stock
2 : the use of a capital letter in writing or printing

Examples of capitalization in a Sentence

Recent Examples on the Web

The index, which is still up 3% for the year, joins transportation, small-capitalization, bank and biotechnology stocks in correction territory as investors have broadly sold riskier assets in recent weeks. Amrith Ramkumar, WSJ, "U.S. Stocks Fall Sharply as Markets Extend Rocky Stretch," 24 Oct. 2018 Small and mid-capitalization stocks—those with a market value less than roughly $5 billion—have performed badly over the past year. Jon Sindreu, WSJ, "In a Trade Fight, Small Could Be Beautiful Again," 22 May 2019 Nearly all of the 14 most popular ones were in the technology sector and many were large-capitalization companies. Spencer Jakab, WSJ, "Who Won Heard on the Street’s Stock-Picking Contest? No One, Really," 24 Dec. 2018 Carta analyzed 6,000 startups with a combined $45 billion in value to find out who actually sits on the capitalization table—or cap table, to use techie lingo—which is the ownership record of who has shares in a company. Jo Piazza, Marie Claire, "Hatched at Twitter," 12 Feb. 2019 The capitalizations were included in the text of the quotes released to journalists. Edith M. Lederer, The Seattle Times, "Iran says US wants to overthrow govt, rejects two-way talks," 25 Sep. 2018 The company’s current capitalization is $1.35 billion, according to Thomson Reuters. Micah Maidenberg, WSJ, "Luxury Hotel Group Eyes Sale," 8 Aug. 2018 The Seattle e-commerce company’s share price was $2,049.50 at 11:35 a.m., pushing its market capitalization over the trillion-dollar mark. Rachel Lerman, The Seattle Times, "Amazon becomes nation’s second public trillion-dollar company," 4 Sep. 2018 Colliers looked at 14 North American markets (all but one, Toronto, in the U.S.) and found that such warehouses sold last year at an average capitalization rate of 5.8 percent. David M Levitt,, "Warehouses Are Now Worth More Than Offices, Thanks to Amazon," 28 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'capitalization.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of capitalization

1852, in the meaning defined at sense 1a

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Last Updated

11 Jun 2019

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The first known use of capitalization was in 1852

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Financial Definition of capitalization

What It Is

In the business world, capitalization has two meanings. The first meaning, also called market capitalization, refers to the value of a company's outstanding shares. The formula for market capitalization is:

Market Capitalization = Current Stock Price x Shares Outstanding

It is important to note that market cap is not the same as equity value, nor is it equal to a company's debt plus its shareholders' equity (although that too is sometimes referred to as simply the company's capitalization).

The second meaning of the term relates to the act of accounting for a cost as an asset instead of an expense.

How It Works

Let's assume Company XYZ has 10 million shares outstanding and the current share price is $9. Based on this information and the formula above, we can calculate that Company XYZ's market capitalization is 10 million x $9 = $90 million.

Companies with less than $1 billion of market cap are generally regarded as "small cap" companies. "Large cap" companies usually have at least $8 billion of market cap.

In the second use of the term, let’s assume Company XYZ creates a new drainage system to prevent run-off rainwater from flooding the neighbor’s business. Because the costs associated with the change constitute an addition to the property and allows it to use the property as a concert venue, Company XYZ can capitalize those costs. So, instead of recording the costs as an expense on the balance sheet, which would lower the company’s net income, Company XYZ records the costs as an asset on the balance sheet. These assets then depreciate, which has a much smaller effect on net profits.

Why It Matters

Capitalization reflects the theoretical value of a company, but this is usually not what the company could be purchased for in a normal merger transaction. One reason for this is that the value of material nonpublic information, management changes, operating synergies between the acquirer and the company, and other intangible factors may not be reflected in the stock price or the financial statements.

In the accounting sense, capitalization is good for companies that want to keep net income as high as possible; however, it’s not  as good for companies that want to pay as little in taxes as possible (business expenses are tax-deductible; capitalized assets are not).

Source: Investing Answers


cap·​i·​tal·​i·​za·​tion | \ ˌka-pət-ᵊl-ə-ˈzā-shən, -ᵊl-ī- How to pronounce capitalization (audio) \

Legal Definition of capitalization

1 : the act or process of capitalizing capitalization of earnings
2 : a sum resulting from a process of capitalizing especially : paid-in capital at capital inadequate capitalization
3 : total capital liabilities of a business including both equity capital and debt capital

Note: Equity capital is considered a liability because the investors may recall some or all of it (as by redeeming stock). Inadequate capitalization of a business is considered by courts in cases dealing with equitable subordination of creditors or piercing the corporate veil.

4 : the total par value or the stated value of no-par issues of authorized capital stock

More from Merriam-Webster on capitalization

Spanish Central: Translation of capitalization

Nglish: Translation of capitalization for Spanish Speakers

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