What is a Cap Table?

Capitalization tables, commonly called “cap tables,” are highly useful spreadsheets maintained by companies that have multiple owners or investors. Cap tables are especially important for private companies at startup and in the early stages of the enterprise. They help business owners make critical decisions regarding market capitalization, equity ownership, taxes, debt-to-equity ratio, and more.

Simply put, a capitalization table lists all the shareholders of the business and what percentage of ownership each shareholder has. This is a living document that should be updated often.

A capitalization table often begins as an Excel spreadsheet that is kept up to date manually. As the number of shareholders and the complexity of the business increases, the job of maintaining the capitalization table usually migrates to an accounting software package.

What Does a Capitalization Table Look Like?

The contents of a capitalization table will vary based on the structure and circumstances of the company, but here is a simple example:

Example of a capitalization table

The capitalization table clearly identifies the owners of the company and the percentage of equity ownership each shareholder has. Typically, the table is divided by shareholder type and stock type. Shareholders may include founders, executives, key employees, angel investors, venture capital firms, and others.

Alternatively, some companies choose to list shareholders in descending order by ownership percentage.

Additional related information may be included as needed for decision-making by company executives. For instance, it may include details about different rounds of funding, public offerings, mergers, acquisitions, and significant financial transactions.

No matter what format is chosen for the capitalization table, the most important thing is to keep it up to date. Each time a shareholder is added, vested options are exercised, key employees leave the company, new funding is obtained, etc., the table needs to be updated so that proper decisions can be made.

How Is a Capitalization Table Used?

The capitalization table is a key reference point for business decision-makers. It should be consulted whenever any financial decision is made that involves the company’s market value and capitalization.


Capitalization helps management monitor the effects of different fundraising efforts. It helps determine the company’s debt to equity ratio. It can be used to monitor employee stock options, convertible securities, and the number of shares that are issued and how many are still available.


The capitalization table shows the current equity state of the company and, over time, indicates the effects of major financial decisions such as stock issuance. It is an important tool for financial forecasting and course corrections.

Another important use of the capitalization table is to monitor the decision-making power of individuals and groups. Typically, the amount of decision-making power is equivalent to the percent of ownership a shareholder has. The capitalization table can indicate whether too much power is being consolidated under a particular individual or group, which might skew the direction of the company.

Financial Analysis

The capitalization table helps entrepreneurs and investors analyze the current state of the company’s capital and predict the effects of significant financial decisions. A capitalization table that shows continuous positive gains can improve the confidence of prospective investors. It can also help key employees understand the company’s financial situation and build their trust.

Company Valuation

When a company is sold, acquired, or merged into another business, any proceeds are generally distributed to the shareholders. An up-to-date capitalization table makes this a straightforward process by indicating the priority of shareholders and what percentage of the proceeds should be distributed to each.

A company’s liquidity is usually determined by a waterfall analysis. This process calculates the amount that each shareholder would receive if all of the company’s assets were converted to cash. The analysis depends heavily on the accuracy of the capitalization table.


Capitalization tables also helpful in the preparation of tax returns by showing the ownership levels of the various investors. Investors and employees may need this information for their own tax returns. It is critical to keep the capitalization table updated; otherwise, the company or its shareholders may pay too much or too little in taxes and face consequences.

Importance of the Capitalization Table

A capitalization table records all capital increases, decreases, and financial transactions that materially affect the ownership, market value, and market capitalization of a company. This includes such things as issuance and cancellation of shares, stock options, assumption and payment of debt, etc.

The capitalization table should be one of the first documents a company generates when starting up. It helps company founders, investors, financial advisors, and others to determine the financial state of the company when major decisions need to be made. As the company grows and the capitalization table becomes more complex, it can become more and more useful as a resource for financial decision-making.

In Summary

A capitalization table, or “cap table,” is a document that indicates a company’s equity capitalization, meaning all securities such as common shares, preferred shares, and stock options. It lists all the shareholders, how much stock they own, and what percentage of ownership they have in the company. A cap table is a critical resource at the startup stage and remains a valuable tool as the company grows. The capitalization table helps determine the market value and market capitalization of the company. It helps executives and investors make important financial decisions. Over time it shows the effects of those decisions.

If you would like to learn more, or have need of financial assistance for your business, we invite you to visit preferredcfo.com or contact one of our CFOs.

About the Author

Don Calcote Outsourced CFO Consultant Preferred CFO

Don Calcote


Don Calcote has over 40 years of experience as CEO & President, Chief Financial Officer, and Senior Commercial Lender in the banking industry. Don’s extensive experience and historical success in seeing a business through all stages of growth brings expert perspective and insight to companies in a wide variety of industries.

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