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TeachMeFinance.com - explain capitalization Capitalization -- Adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan. another definition... capitalization -- (1) the value of authorized or outstanding shares of stock or bonds in a business firm. (2) the process of adding earned but uncollected interest to the loan balance, a practice prohibited in some states. (3) a method of estimating the present value of future income. (4) the total value of an owner's investments in a business. historic definition... Capitalization -- Placing a value on and creating something to represent that value. For instance, the capitalization of a business consists in placing a value on it and then issuing stock to represent that value. Bonds in contradistinction to stock represent an indebtedness. Tt is a common practise, however, to speak of the amount of the bonds of a company and the amount of its stock, both added together, as the capitalization of the company as the amount for which it is capitalized. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.