The word "capital increase" refers to the act of increasing the amount of money a company has available for investment. The spelling of this phrase can be broken down phonetically as /ˈkæp.ɪ.təl ˈɪn.kriːs/. The first syllable, "cap," sounds like the word "cat" with a "p" at the end. The "i" in "təl" is pronounced like the "i" in "tin," and the stressed syllable, "kri," sounds like "cree." The final syllable, "s," is pronounced with a short "i" sound like the letter "s."
A capital increase refers to a financial transaction in which a company raises additional funds by issuing new shares of its stock or increasing the par value of its existing shares. It is a means by which companies shore up their capital structure or expand their operations. This process typically involves the issuance of shares to existing shareholders or external investors.
During a capital increase, companies may choose to offer their shares at a price that is higher than their current market price. The difference between the market price and the issued price is known as the "premium." This premium helps the company raise the necessary funds and incentivizes shareholders or new investors to participate in the offering.
By increasing its capital, a company can improve its financial standing, bolster its balance sheet, and support its growth strategy. The additional funds obtained from a capital increase can be used for a variety of purposes, such as funding research and development, acquiring new assets or businesses, paying off debts, or expanding into new markets.
A capital increase is often subject to approval by various regulatory bodies or shareholders, depending on the legal and regulatory frameworks governing the company. Such transactions are typically carried out in accordance with applicable securities regulations and may require the assistance of investment banks or underwriters to ensure a successful execution.
The etymology of the word "capital increase" can be understood by analyzing the origins of its constituent words, "capital" and "increase".
1. Capital: The word "capital" derives from the Latin word "capitālis", which means "of the head" or "related to the head". In ancient Rome, wealth and property were recorded in a person's head, and hence the term came to represent financial assets and resources. Over time, "capital" evolved to refer to financial resources invested in business ventures or other productive activities.
2. Increase: The word "increase" comes from the Latin word "increasare", which means "to grow" or "to become larger". It traces its roots back to the Latin word "crescere", which carries the same meaning. "Increase" denotes the act of making something greater in quantity, size, or value.