kapitalizace

Kapitalizace refers to the process of converting earnings or profits into capital. It is a fundamental concept in finance and economics, particularly relevant to business valuation and investment. In its simplest form, capitalization involves reinvesting profits back into a business to increase its assets or expand its operations, thereby enhancing its overall value.

The most common application of capitalization is in the valuation of income-producing assets, such as real estate or businesses. This is achieved through capitalization of earnings or capitalization of income. The capitalization rate is a key metric used in this calculation, representing the expected rate of return on an investment. The formula typically involves dividing the expected annual net income by the capitalization rate to arrive at the asset's capitalized value. A higher capitalization rate generally suggests a higher risk or a lower expected return, leading to a lower asset valuation, and vice-versa.

In the context of a company's stock, "market capitalization" or "market cap" refers to the total market value of a company's outstanding shares of stock. It is calculated by multiplying the current share price by the total number of outstanding shares. Market capitalization is a widely used indicator of a company's size and is often used by investors to categorize companies, such as large-cap, mid-cap, and small-cap stocks, which can influence investment strategies.

The concept of capitalization is also related to the idea of depreciation, where the cost of an asset is gradually expensed over its useful life. Capitalizing an expense, as opposed to expensing it immediately, means treating it as an asset on the balance sheet and amortizing it over time. This treatment is generally applied to significant expenditures that are expected to provide future economic benefits.