capitalization

noun
cap·​i·​tal·​i·​za·​tion | \ˌka-pə-tə-lə-ˈzā-shən, ˌkap-tə-, British also kə-ˌpi-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

Yet during the long-term bear market in stocks between 1968 and 1982, the capitalization of the U.S. stock market grew by 2.1% per year while the median household income increased by 6.3%, or triple that rate. Tom Saler, Milwaukee Journal Sentinel, "Tom Saler: The connection between corporate profits, public incomes is imprecise, at best," 12 Jan. 2018 For example, the children in the business may want to leave cash and profits in the company for expansion or greater capitalization. Tom Cooney And Crystal Faulkner, Cincinnati.com, "Careful planning essential when transferring business ownership to children," 11 July 2018 The company said in its annual report its capitalization of those costs is limited, and so some of them are expensed as they are incurred. Michael Rapoport, WSJ, "Streaming TV or Movie? Why It Matters to Amazon’s Profits," 8 July 2018 The text of the proposal is littered with random capitalization, because some things are too important to lowercase. Lizzie Johnson, SFChronicle.com, "Regret haunts Wine Country fire hero: ‘I’ve never cried this much’," 13 July 2018 The gamble paid off, giving the company a capitalization of $26.5 billion by the end of the day and making billions for the top five shareholders. Hallie Detrick, Fortune, "Did the IPO Market Seem White-Hot Over the Last 6 Months? You're Right, It Was," 2 July 2018 Produced by Tommy Mottola, The Dodgers, Tribeca Productions and Evamore Entertainment, A Bronx Tale's capitalization has been reported as $10 million. David Rooney, The Hollywood Reporter, "'A Bronx Tale: The Musical' Sets Broadway Closing Date," 28 June 2018 Tippett’s meaning seems clear despite 18th century phrasing and abbreviations, not to mention capitalization that looks erratic to 20th century eyes. James Barron, New York Times, "A Colonial Cemetery in a Park, and a Question: Does the City Own It?," 28 May 2018 And yes, the capitalization was part of the original report. Lyndsey Matthews, Marie Claire, "A Psychologist Reveals What Trump's Fixation with Gold Really Means," 30 Jan. 2017

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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The first known use of capitalization was in 1852

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More Definitions for capitalization

capitalization

noun

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

capitalization

noun
cap·​i·​tal·​i·​za·​tion | \ˌka-pət-ᵊl-ə-ˈzā-shən, -ᵊl-ī- \

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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