Overcapitalization vs. Undercapitalization

Overcapitalizationnoun

The state of being overcapitalized.

Undercapitalizationnoun

(finance) Insufficient capitalization

Overcapitalizationnoun

(business) too much capitalization (the sale of more stock than the business warrants)

Undercapitalization

Under-capitalization refers to any situation where a business cannot acquire the funds they need. An under-capitalized business may be one that cannot afford current operational expenses due to a lack of capital, which can trigger bankruptcy, may be one that is over-exposed to risk, or may be one that is financially sound but does not have the funds required to expand to meet market demand.