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Under capitalisation

Financial Management

How does under capitalisation increases the rate of dividend in comparison to similar situated companies in the industry?

Swathi Krishna

CA Final

★ 8K+

07-Aug-20 18:26

350

Answers (2)

The term under-capitalisation should never be considered synonymous with inadequate capital. The profits are higher than warranted by the book value of its assets. Such a company can pay a higher rate of dividend and the market value of its shares is much higher than its face value.