Capitalization of the company is the main indicator of the effectiveness of its work

Today the word "capitalization" can be heard quite often in economic news. Its main indicators are considered to be two: growth or fall.

Among economists, there is an opinion that the company's capitalization is a kind of its cost. It should be noted that these two indicators are in direct proportion. So, the higher the capitalization, the more expensive the company. When the indicator of capitalization decreases, the cost is lost.

The company's capitalization is the value of its shares on the stock exchange. For example, with an active purchase of shares and the value of the company increases. An interesting feature of these securities is that the business entity itself has nothing to do with them. The only thing he can do is buy them back (often that's exactly what happens). In this case, the shares may not be accompanied by the accrual of dividends. However, they are always a kind of "commodity".

The analysis carried out showed a small number of studies in the field of capitalization. Basically, it is considered from the point of view of the growth of the company's own capital. The main emphasis in this case is on joint-stock companies due to the availability of their shares in free circulation. The valuation of their value is made on the basis of the exchange difference of such securities.

The domestic market shows that the capitalization of the company is an indicator, which it is advisable to evaluate it based on foreign practice. Due to its limited scope, equity in the joint-stock form has not received its wide distribution. Therefore, with this approach, there is a possibility that a significant part of Russian enterprises will fall out.

Based on the research of domestic scientists (for example, Galtseva E. V.), the scientific literature has formed a company capitalization rating, depending on the various forms of its manifestation in the domestic market. So, proceeding from the mechanism of increasing capitalization, we can distinguish three of its main forms (real, subjective and fictitious (market)). All specified forms should be necessarily reflected in the third section of the balance of the enterprise as an increase in own sources for financing. In this case, they have different sources of origin and initiation. Let us dwell in more detail on each form.

Real capitalization of the company

This is a reflection of the natural result of its financial and economic activities. So, an effectively operating enterprise always has a positive result from its core business. The increase in the company's capitalization shows its ability to generate its revenues, with subsequent expansion of the business and higher profitability in the future.

Subjective capitalization

In this case, this economic indicator is controlled by internal management. Valuation of intangible assets is subjective (contractual). Therefore, an increase in the value of property can be considered a subjective operation, since the capitalization formed in this way can disappear at any time (changes in the market situation or political situation in the country).

Fictitious (market) capitalization

The capitalization of a company is its market value, which is represented by the product of the share price and the total number of shares (R. Koch). The growth of such a value is reflected in the balance sheet (in the asset). The main difference between this form of capitalization and the previous one is that initiation is not carried out by internal management, but by external structures that carry out stock quotes on the exchange.