What are the remedies for over-capitalisation?

CA Intermediate · Financial Management and Strategic Management · PYQS · September 2024
What are the remedies for over-capitalisation?

Suggested Answer and Working Notes:

(c) Following steps may be adopted to avoid the negative consequences of over-capitalisation: (i) Company should go for thorough reorganization. (ii) Buyback of shares. (iii) Reduction in claims of debenture-holders and creditors. (iv) Value of shares may also be reduced. This will result in sufficient funds for the company to carry out replacement of assets.

Topics: Part-A: Financial Management

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