For Watered Stock we have terms and definitions in 3 topics. The topics are Finance, Frauds and Scams and Investing.

Watered Stock (Finance)

A stock representing ownership in a corporation that is worth less than the actual invested capital, resulting in problems of low liquidity, inadequate return on investment, and low market value.

Watered Stock (Frauds and Scams)

Stock representing ownership of overvalued assets whose total worth is less than their invested capital. The condition of overcapitalized corporations may result from inflated accounting values, operating losses or excessive dividends. Some negative characteristics of watered stock are the inability to recoup full investment in liquidation, insufficient return on investment, low market value and the firm's reduced ability to capitalize on growth opportunities. The customary method of correcting the situation is for a corporation to either increase its assets without increasing its outstanding shares or reduce outstanding shares without reducing assets. Other methods do exist.

Watered Stock (Investing)

Stock representing ownership of overvalued assets whose total worth is less than their invested capital. The condition of overcapitalized corporations may result from inflated accounting values, operating losses or excessive dividends. Some negative characteristics of watered stock are the inability to recoup full investment in liquidation, insufficient return on investment, low market value and the firm's reduced ability to capitalize on growth opportunities. The customary method of correcting the situation is for a corporation to either increase its assets without increasing its outstanding shares or reduce outstanding shares without reducing assets. Other methods do exist.

See Also: Dividends; Issued And Outstanding; Liquidation; Overvalued; Par

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