What is capitalisation ?

 Capitalization theories generally refer to different perspectives on how to value and structure capital in economic and financial contexts. Some key theories include:

1. **Modigliani-Miller Theorem:** Suggests that, under certain conditions, the value of a firm is not affected by its capital structure. In other words, the way a company finances its operations (through debt or equity) does not impact its overall value.

2. **Trade-off Theory:** Posits that there's an optimal capital structure where the benefits of debt (tax shields, lower cost of capital) are balanced against the costs (financial distress, bankruptcy risk). Firms aim to find the right mix of debt and equity.

3. **Pecking Order Theory:** Proposes that companies prefer internal financing (retained earnings) over external financing (debt or equity). When external financing is necessary, companies prefer debt over equity, as issuing equity might signal that the company's shares are undervalued.

4. **Agency Cost Theory:** Focuses on the conflicts of interest between different stakeholders in a company, such as shareholders and managers. The theory suggests that the choice of capital structure is influenced by the need to align the interests of these stakeholders.

5. **Capital Market Imperfections Theory:** Acknowledges that markets are not always perfect, and there may be information asymmetries or transaction costs that impact a firm's ability to raise capital. This theory explores how imperfections in capital markets affect financing decisions.

These theories provide different frameworks for understanding how companies make decisions regarding their capital structure, debt levels, and overall financial strategy. Keep in mind that these are theoretical perspectives, and real-world financial decisions are often influenced by a combination of factors.