Equity financing

Shareholders’ total equity represents two major components as retained earnings and Paid-In Capital. Other Equity contributors are Treasury stocks and other Reserves. For a sole proprietorship business or a limited partnership for a small business, both represent the same components. The fact that a sole proprietor or a small partnership comes with unlimited business liability …

Paid-In Capital Part and Retained Earnings: Example and Detail Explanation Read More »

A company can raise funds through equity and debt financing. Shareholders’ equity is denominated by share capital and share premium. The common stock or share capital represents the resources invested by shareholders. Over time, the total valuation or market capitalization of stock changes through share price adjustments. Share premium or Additional Paid-In capital only represents …

Accounting for Additional Paid-in Capital: Example and Detail Explanation Read More »

The Paid-In capital or the Contribution capital represents the shareholders’ investment in a company through cash or assets. It forms a significant portion of the Shareholders’ total equity along with Retained Earnings. It comprises two parts of the Paid-In capital at Par value plus the Additional Paid-In capital above the par value of the share. …

Accounting for Paid-In Capital: Calculation, Example, And Importance Read More »

Companies can raise funds mainly through two forms, debt, and equity. Equity financing is a company’s prime liability towards its shareholders. Companies often issue additional shares with initial public offerings or rights issues to raise funds. Additional Paid-in capital or Share Premium refers to the money shareholders pay above the face value of the company …

What is Additional Paid in Capital? And How to Calculate It? Read More »

We know that a company’s management has three key decisions to make for a company to effectively achieve the strategic goals. These key decisions are Investment, Dividend, and Financing Decisions. These decisions are linked and affect directly each other. A well planned and a positive NPV cash flow project can yield high profits for the …

Rights Issue of Shares: Key Processes and How Does It Work? Read More »

In a balance sheet, along with share capital, another important written value is retained earnings. Share capital and retained earnings make up the total book value of the company. These are the portion of profits that any company keeps within itself. The term Capitalization is important to understand, in financial terms, it means creating an …

Capitalization of the Retained Earnings: Detail Explanation Read More »

Companies raise equity finance through the issue of shares to shareholders. These shares are issued at a pre-determined rate known as the nominal value of the share. This value is defined in the memorandum of association of the company. A company can issue the shares to its shareholders at the nominal value or a price …

Accounting Entry for the Bonus Share Issue: Explanation with Example Read More »

Capitalization of profits refers to the conversion of the retained earnings of a company into capital which can then be issued to the shareholders of the company in the form of dividends or stocks. Usually, the latter option of giving stocks is preferred to paying dividends. This option is mostly chosen by companies that do …

Capitalization of profits: How Does It Work? Benefit and Limitation Read More »

Equity finance is one of the most important sources of finance for a company. Equity finance can have many advantages and disadvantages for a company. One of the main disadvantages of equity finance for a company is that equity finance dilutes the ownership and control of the company. Usually, existing owners of the company may …

ACCOUNTING ENTRY FOR RIGHT SHARES ISSUE: ACCOUNTING ENTRY, DETAIL EXPLANATION Read More »