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What is Understanding Capitalization Theories about?

This document discusses theories of capitalization. It defines capitalization broadly as the total amount of capital employed in a business, including equity, long-term debt, reserves, and short-term debt. Two main theories for determining the appropriate level of capitalization are discussed: the cost theory, which is based on the costs of assets and operations, and the earnings theory, which ties capitalization to expected earnings and rates of return. Types of capitalization are also outlined, including

Author

ANURAG SHARMA 19111507

Language

EN