1. Let us call the capitalization rate of an enterprise the ratio between its capital and the total of its balance sheet (= total liabilities Passif or assets).
The mathematics of exponential accumulation does not enter into the determination of this ratio.
2. The replacement of the mandatory mention "Enterprise with capital of..." " by "Enterprise capitalized at... % (... €)" has two advantages.
The capitalization rate provides better information about the financial strength of an enterprise than the amount of its capital. Comparisons of capitalization rates are likely to contribute to the increase in their averages.
3. A young farmer buys a farm entirely on credit.
Legally, he is the new owner. Economically, it becomes so as its debt is amortized.
4. The capital contributor of an enterprise in its own name is the economic owner of only a proportion of the assets listed on the balance sheet.
Holders of shares in the capital of a commercial enterprise, other than a cooperative or a mutual society, are in the same situation. The proportion is the capitalization rate. Depending on whether, for example, this rate is about a quarter, a half or a three-quarters, all credit providers hold the additional amount economically.
5. The security of the savings in capital depends on many variables.
Nevertheless, a savings in capital yields an annual profit of 9%, with a capitalization rate of 40%, while another yields an annual profit of 6%, with a capitalization rate of 80%. Which one has the best combination of efficiency and safety?
6. The profit rate products by the corresponding capitalization rate provide an index.
In the previous numerical example, the lowest index is 360 (9 times 40) and the highest index is 480 (6 times 80).