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 Billboard previously reported than in an Oct. 11 letter mailed to investors one month after the $10 million sale closed, Gordon and Wolkov detailed the $69 million debt and equity capitalization the festival brand carried prior to the sale. Dave Brooks, Billboard, "'Thunder on the Mountain' Suit Against Former KAABOO Owners Gets Green Light From Judge," 23 Dec. 2019 The vast majority of ads mimic, to an almost uncanny degree, the President’s distinct wordsmithing on Twitter, down to the frequent capitalization of words or sentences, the vitriol and the uncharitable nicknames for political foes. Chris Wilson, Time, "The Trump Campaign Has Raised Millions Off Impeachment — And Facebook Is One of Its Most Powerful Tools," 5 Dec. 2019 His total capitalization from the fund at the time amounted to about $4.2 million, not the $1.5 billion Trump alleged. Allan Smith, NBC News, "Trump allies respond to second whistleblower: 'Why should I care?'," 6 Oct. 2019 The email is distinctively Collins, with unusual capitalization, odd spellings, and even a text emoji and an lol, text-speak for laugh out loud., "John Norman Collins — one of Michigan's most notorious killers — pens letter to the Free Press," 11 Nov. 2019 SoftBank’s entry into into the ride-hailing giant’s capitalization table was part of the solution to a problem. Tim Culpan / Bloomberg, Time, "Why WeWork's Biggest Investor Suddenly Turned Against the CEO," 23 Sep. 2019 Lampe-Onnerud won’t say what the exact relationship is between her firm and her various partners or Cadenza’s total capitalization (the website does report combined funding of $500,000 from Connecticut, New York and Massachusetts). David Holahan,, "Profiles in Connecticut innovation: High-energy Cadenza makes power storage more efficient," 8 Nov. 2019 The hashtag and capitalization of Saints added the Fleur de Lis, the emblem associated with the Saints and worn on the team’s helmets., "People certainly noticed as one person wrote, ‘‘Who Dat, father?’’ At least one Saints player took the tweet as a good sign: ‘‘Wow, are we blessed or what?!??’’," 13 Oct. 2019 Meanwhile, Hunter's total capitalization from the fund at the time amounted to about $4.2 million, not the $1.5 billion Trump alleged. Allan Smith, NBC News, "Ted Cruz: 'Of course' Trump was wrong to ask China to probe Bidens," 13 Oct. 2019

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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Last Updated

8 Jan 2020

Cite this Entry

“Capitalization.” The Dictionary, Merriam-Webster Inc., Accessed 21 January 2020.

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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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