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You will prepare and submit a term paper on Shareholders Equity. Your paper should be a minimum of 2750 words in length.
You will prepare and submit a term paper on Shareholders Equity. Your paper should be a minimum of 2750 words in length. Broadly shareholders’ equity constitutes the following two elements
b) Income/ profits earned by the entity that has not been distributed among owners as a dividend or otherwise used but retained in the business for its further exploitation by the business. This is also technically called retained earnings.
Total shareholders’ equity is the sum total of common stock issued and outstanding, preference capital issued and outstanding, additional paid-in capital, retained earnings, and accumulated other comprehensive income.
It may be noted that common stock may be issued in exchange for cash, services, or property. It can also be issued as a result of the incorporation of an existing business. When stocks are issued in exchange for property, the amount included in the shareholders' equity is the fair value of a property or fair value of stock whichever is readily available. When stocks are issued in exchange for services, the value included in shareholder's equity is the fair value of the stock at the time agreement is entered into, if known. Otherwise, the fair value of services is taken as part of the shareholder's equity. When an existing business is incorporated, the fair value of the assets and liabilities including goodwill is computed and the net amount taken as proceeding from the issuance of stock is included in the shareholder's equity.
It is important to note that shares issued equal the number of shares that have been issued minus shares that are retired. This number is not affected by treasury stock held by the company. Shares outstanding equals the number of shares issued minus the number of shares of treasury stock held by the company. The number that will be extended for common stock to be added in shareholders’ equity is the number of shares that are issued and outstanding (after reducing the number of treasury stock held) multiplied by the par or stated value per share.
