This website uses cookies to ensure you have the best experience. Learn more

Owners' Equity Paper

632 words - 3 pages

Owners' Equity Paper
ACC 423
September 5, 2011
University of Phoenix

Owners' Equity Paper
The investments of stockholders, corporations depend a lot on to fund their business operations. The company stands to gain and grow from selling their stock, when viewing each entity separately. The investor hopes to gain and earn a profit by investing in a company in hopes that their stock prices will go up. The company and the investor depend on each other. The more opportunity the company has to grow with the more people invests. Also the more opportunities for the company to grow, the happier they are able to make their investors, who in turn spend more money.
The owners’ equity discusses the importance that common stockholders and preferred stockholders require in a company. The stockholders are the entities who have paid-in capital to a company to offer the investment planned to be used for operations of the company. In the next paragraph it will be ...view middle of the document...


Paid-in capital is important to organizations, because investors need to be able to see that the company is able to meet obligations through operations alone, and their ability to pay dividends. Paid-in capital is money that the company has raised from equity rather than ongoing operations and is paid in addition to the par value of the stock. It includes what is paid for capital stock plus any additional paid-in capital. It is also what the business earns by issuance of stock. Earned capital tells an investor more about the condition of the company. Earned capital is the money that an organization has generated as a result of operations. New companies will usually hold onto this money as retained earnings to use for future growth. 
From the investor’s point of view, it is important that a company earns income from operations better than the sale of stock. The quantity of received capital of a company report in their financial statements demonstrates to the stockholders the real cost of their assets. Although a company that constantly report paid-in capital in additional of earned capital, would not be seen as a good investment opportunity.
The diluted earnings per share demonstrate to the investor possible dilutive common shares that were unpaid during the certain period. The investor review the importance of diluted earnings per share by a calculation: the basic earnings per share – net income divided by the weighted-average shares unpaid, plus the earnings per share less any convertibles and impact of options, warrants, and other dilutive securities (Intermediate Accounting, 2007).
Conclusion
Paid-in capital is retained separate from earned capital to avoid misreading information where operational subsidies are created. Investors are most likely to be more concerned with a company earned capital in comparison to its paid-in capital. This is because the earned capital represents the earning abilities of the company. Diluted earnings explain the basic earnings per share calculations, including the influences that dilutive securities can have on retributions.

Reference
Donald, K. E., Weygandt, J. J., & Warfield, T. D. (2007). Intermediate Accounting (12th ed.). Danvers, MA: Susan Elbe.

Other Papers Like Owners' Equity Paper

Different Types Business Essay

697 words - 3 pages Characteristics of sole proprietorship: Easy Setup/Capital/Legal Restriction/Equity Investment / Management/Freedom of Action/ Easy Dissolution/Easily Transferable In this type of business owner can start up easy. It does not have to file any paper work as long as the business is under their own legal name. The personal responsibility of the owner is unlimited. The money that is needed is provided by the owner. If you need more money you

Ippa Essay

705 words - 3 pages synonymous with common stock. They both mean the same referring to the value of equity that has been acquired by owners in exchange for cash. Describe some of the issues the SEC must consider in deciding whether the United States should adopt IFRS. If the SEC decide on changing, it would have to show compelling reasons that would benefit the United States business to support the change. Changing all the rules would cost business billions of

Maruti Suzuki

8102 words - 33 pages financing-mix and so it relates to the capital structure or leverage. Capital structure refers to the proportion of long- term debt capital and equity capital required to finance investment proposal. There should be an optimum capital structure, which can be attained by the judicious exercise of financial leverage. This paper mainly concentrates on the exercise of financial leverage in the context of understanding its impact on earnings and

Shared Capitalism

1084 words - 5 pages With the rising popularity of shared capitalism in the United States, it is worthwhile to analyze the effects this trend and the workplace theories that correspond to it. The purpose of the paper is to show not only how forms of shared capitalism in the workplace can increase overall employee compensation, but how several labor theories relate and support the outcomes of shared capitalism. More specifically, three theories will be extrapolated

Fasb Codification

1251 words - 6 pages Brooke Codification Research Paper Acc 303 11/15/2011 Introduction This paper is an analysis of the FASB Accounting Standards Codification and the Research System available through the AAA/FASB website. It will walk the reader through a select few topics focusing on how the codification literature addresses each topic. The first topic analyzed will be the definition of accounting policies. The paper will go on to discuss information

Term Paper

7155 words - 29 pages Paper, forthcoming in North-Holland Handbook of Economics (eds. G. Constantinides, M. Harris and R. Stulz), 2002 2) Asquith, P., and D. Mullins, 1986, “Equity Issues and Offering Dilution,”Journal of Financial Economics 15, 61-89. 3) Baker, M., and J. Wurgler, 2002, “Market Timing and Capital Structure,” Journal of Finance 57, 1-32. 4) Baker, M., and J. Wurgler, 2004, "A Catering Theory of Dividends" Journal of Finance 59, 1125-1165 5

Fianance

1067 words - 5 pages allows their owners to specific right and claims on specific cash flow or values. examples are us treasury bills sold by us treasury usually default fee, commercial paper issued by financially secured firms to large investors usually has a low risk fee, certificates of deposits, mortgages. m some financial institutions are commercial banks, insurance companies, pension funds, mutual funds, n types of market are: physical asset vs

Venture Capital

7046 words - 29 pages Venture Financing in India A. Sahay* Abstract Innovation is stated to be the initiating force for a new venture but venture finance is the life blood for entrepreneurship. Innovation is the fuel for igniting the Entrepreneurial engine, Venture capital revs up the engine fast till it attains sustainable speed to change the gears from idea to entity, eventually reaching IPO stage. The paper starts with Research and Development Cess Act, 1986

Fin 370 Week 1 Terms

717 words - 3 pages bond, indicates a creditor relationship with a firm or with a federal, state, or local government; or signifies other rights to ownership. Securities are broadly classified as debt securities (bonds) and equity securities (shares common stock) one example I have for this is a stock that my husband and I own, we have a piece a paper that is security for owning it. Stock: An instrument that signifies an ownership position in a corporation. One

Fdgfgfdg

7130 words - 29 pages representation are: 1. Completeness 2. Neutrality 3. Free from error E. Enhancing qualities are comparability (including consistency), verifiability, timeliness and understandability. F. A key constraints is cost effectiveness. IV. Elements of Financial Statements (T1-12) A. Balance sheet elements: 1. Assets 2. Liabilities 3. Equity 4. Investments by owners 5. Distributions to owners B. Income statement elements: 1. Revenues 2

Industrial Disputes

6688 words - 27 pages 1973 it changed its name to M/s Reaz Garments Ltd. and expanded its operations into export market by selling 10,000 pieces of men's shirts worth French Franc 13 million to a Paris-based firm in 1978. It was the first direct exporter of garments from Bangladesh. Desh Garments Ltd, the first non-equity joint-venture in the garment industry was established in 1979. Desh had technical and marketing collaboration with Daewoo Corporation of South

Related Essays

Using Eva To Align Management Incentives With Shareholders’ Interests

594 words - 3 pages achieved; it should definitely not include any uncertainty about the monetary value the bonus will have. This means that we favor cash or cash equivalents over stock options.3” If equity is not the solution, what can owners do to better align managers incentives with the objective of maximizing firm value? Its proponents suggest that Economic Value Added (“EVA”) is the answer. I will explore in this paper the rationale for using EVA to align management incentives with a firm’s wealth creation over time. In the process, I will present two leading perspectives on how to implement an EVA-based incentive compensation schem

Modigliani And Miller Essay

921 words - 4 pages This paper provides a theory on the effect of financial structure of the firm on market valuations. In other words, does capital structure influence value of the firm? I believe the introduction of the paper gives an important explanation of how Modigliani has reached his theorem, because his main goal was to correct the drawbacks of other theories. To understand the importance of such a theory, I considered adding these other theories as an

Corporate Finance Essay

8553 words - 35 pages expected return on equity or cost of equity to calculate the cost of capital. -this is important for firms because it gives an objective metric rather than relying on manager's "gut feelings" about a project Must ask two questions to determine cost of capital: 1. How much must company earn on existing assets to meet expectations of creditors and owners? -example: If creditors expect 10% on $100 loan, would be $10. But because interest payments

Paper

1011 words - 5 pages    64,453,000 57,519,000   The company’s Owners Interest on the Minority ----- ----- ----- ----- Total Equity 65,800,000 61,553,000   64,453,000 57,519,000   | | | Thus from the calculations above it can be measured that the Shared capital accumulated profits from 27,550.0 to 21,491.0 in the year