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What is Capitalization/meaning/concept

Capitalizing is, in general, any action with the function of increasing the capital of an organization, that is, of adding value to an institution. Thus, capitalization is the process by which this goal can be achieved.

The capitalization concept is applied exclusively in the area of ​​economics and finance , as it has several variants and meanings.

The various forms of capitalization

Market capitalization is a measure of a business organization expressed by the price of each share that must be multiplied by the number of shares at any given time. The resulting amount indicates the potential equity of this company.

Simple capitalization is considered an accounting formula in which its main characteristic is knowing that the interest on capital is not considered as part of this capital. On the contrary, when it comes to compound capitalization, interest is accounted for as part of the overall capital. Both cases are part of the context of financial mathematics. In this sense, it is worth recalling another concept, the capitalization annuity, which consists of a certain amount deposited annually in a bank at compound interest with the intention of finally obtaining a certain capital.

On the other hand, there are also capitalization tables that are popularly known as programmed savings, in this sense, there are several savings systems: with equal, increasing or decreasing shares. In a capitalization table there are several columns: the one that shows the periods, another that indicates the deposit for each period, another with the corresponding interest, a fourth with capital increase and the fifth and last one with the accumulated capital.

In the context of finance, it should be taken into account that there are two fundamental concepts: amortization and capitalization

The first refers to the form of payment of a debt and the second to the various forms of saving to obtain capital.

It is possible to understand capitalization as a system that employs companies for financing . In this sense, a company can be financed through its own resources (for example, by selling a part of it) or by obtaining external financing (for example, through a credit ).

Unemployment capitalization consists of the unemployed person receiving a single payment for entitlement to a benefit, in this way, he can carry out a business activity. This measure intends to encourage entrepreneurs to start a new work activity.

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