what does over capitalisation means...?

Dear student,

Over capitalisation refers to a situation when a firm possess more than required assets. In an over capitalised firm earnings are insufficient to pay interest or dividend. It occurs in following ways:
* when company has issued more shares and debentures than required.
* when company has borrowed at high rate of interest.
* when dividends are paid at high rates.
* when high rates of taxes are imposed by government.

Regards