capitalize

verb cap·i·tal·ize \ ˈka-pə-tə-ˌlīz , ˈkap-tə- , British also kə-ˈpi-tə- \
Updated on: 15 Nov 2017

Definition of capitalize

capitalized; capitalizing
transitive verb
1 :to write or print with an initial capital or in capitals
  • Capitalize the names of cities and states.
2 a :to convert into capital
  • capitalize the company's reserve fund
b :to treat as an amortizable investment in long-term capital assets rather than as an ordinary operating expense to be charged against revenue for the period in which it is incurred
  • capitalize development costs
3 a :to compute the present value of (an income extended over a period of time)
b :to convert (a periodic payment) into an equivalent capital sum
  • capitalized annuities
4 :to supply capital for
intransitive verb
:to gain by turning something to advantage
  • capitalize on an opponent's mistake

Examples of capitalize in a Sentence

  1. Remember to capitalize the I in Internet.

  2. Capitalize the first word of your sentence.

  3. She rarely capitalizes her name when she signs her e-mails.

  4. The venture was capitalized with a loan of one million dollars.

  5. You can capitalize your investment at any time.

Recent Examples of capitalize from the Web

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

Origin and Etymology of capitalize


Financial Definition of CAPITALIZE

capitalize

What It Is

Capitalizing refers to the accounting practice of characterizing the costs of an asset purchase as a long-term asset on the balance sheet instead of an expense on the income statement.

How It Works

Companies capitalize the cost of asset purchases in order to spread out the cost of the assets over many reporting periods. This way, net income is not affected disproportionately in the reporting period in which the asset was purchased.

Rather than being listed as one large expense in one reporting period, a capitalized asset cost will be expensed via depreciation over many reporting periods. On the balance sheet, it will appear as a long-term asset and cash debit. The income statement will also account for a portion of the asset's cost via depreciation expenses.

To illustrate, suppose Company XYZ purchases equipment for $10,000. Rather than report the full $10,000 cost in that period, the company characterizes the purchase as a $10,000 long-term asset. On the balance sheet, the long-term asset account increases and the cash account decreases by $10,000.

As the long-term asset depreciates, the depreciation expense is reported on the income statement. As a result, Company XYZ's bottom line is not grossly affected by the substantial asset purchase in that period. The remainder of the $10,000 will, however, need to be continually reported as a depreciation expense until the asset has fully depreciated.

Why It Matters

Management's decision as to whether to capitalize or expense a purchase has a direct impact on its bottom line. If a company were to report the total cost of an asset purchase as an expense on its income statement (which is to say not capitalize), the cost, depending on the size, it would significantly reduce their net income figure for the reporting period.

Because earnings are probably the single most important indicator of a company's financial strength and growth potential, they are used by investment analysts to provide estimates of a company's growth potential and offer target price estimates for investors interested in purchasing shares. Therefore, company management has a huge interest in managing the way earnings are reported.



CAPITALIZE Defined for English Language Learners

capitalize

verb

Definition of capitalize for English Language Learners

  • : to use a capital letter to write, print, or type (a letter of the alphabet)

  • : to begin (a word or name) with a capital letter

  • : to provide the money that is needed to start or develop (a business)


CAPITALIZE Defined for Kids

capitalize

verb cap·i·tal·ize \ ˈka-pə-tə-ˌlīz \

Definition of capitalize for Students

capitalized; capitalizing
1 :to write with a beginning capital letter or in all capital letters
2 :to provide money needed to start or develop (a business)
3 :to gain by turning something to advantage
  • The winner capitalized on his opponent's mistakes.

capitalization

\ˌka-pə-tə-lə-ˈzā-shən\ noun

Law Dictionary

capitalize

transitive verb cap·i·tal·ize \ ˈka-pət-ᵊl-ˌīz \

legal Definition of capitalize

capitalized; capitalizing
1 a :to convert into capital
  • capitalize the company's earnings
b :to treat as a capital expenditure rather than an ordinary and necessary expense
  • the cost of the merger must be capitalized
2 a :to compute the present value of (an income extended over a period of time) — compare amortize
b :to convert (a periodic payment) into an equivalent capital sum
  • capitalized annuities
3 :to supply capital for
  • had capitalized the business with her own savings


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