What do you understand by 'over-capitalised' company? Discuss the corrective measures required to be undertaken by an over-capitalised company.

A company is said to be over-capitalized, if its earnings are not sufficient to justify a fair return on the amount of share capital and debentures that have been issued. Otherwise, it is said to be over capitalized when total of owned and borrowed capital exceeds its fixed and current assets i.e. when it shows accumulated losses on the assets side of the balance sheet. If a company is over-capitalized, its capital also requires restructuring by taking following corrective measures: Buy-back of own shares. Paying back surplus share capital to shareholders. Repaying loans to financial institutions, banks, etc. Repaying fixed deposits to public, etc. Redeeming its debentures, bonds, etc.