CAUSES
- over issue of capital
- high cost of formation
- over estimation of earnings
- fluctuation period
- inadequate depreciation policy
- liberal devident policy
- high tax ratio
- costly borrowings
- shortage of capital
UNDER CAPITALIZATION
CAUSES
- under estimation of capital
- under estimation of capital ratio
- conservative devident policy
- unforeseen increase on earnings
- large amount of reserve
- high efficiency
- desire to retain control
- low promotion expenses
- low tax rate
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