Each operating business has a certain amount of capital formed from different sources, of which the equity of the business is the net assets of the business and owned by the shareholders. bronze.

Viewing: What is equity in english

August 21, 2019 What are Assets? Types of assets in financial statements August 20, 2019 What is the debt to equity ratio (D/E ratio)? August 20, 2019 What is financial leasing? Conditions of finance lease August 19, 2019 What is Cash Turnover Ratio and Inventory Turnover Ratio? August 20, 2019 What is corporate capital? Classify

Equity (Equity)

Concept

Equity or net assets; In English there are several ways of saying equity, owner’s equity or stockhold’s equity.

Equity is the remainder of a business’s assets after its liabilities have been paid off.

Equity is capital owned by business owners, members in joint ventures or shareholders in joint stock companies.

Equity is one of the regular sources of funding in an enterprise, only when the unit ceases to operate or goes bankrupt, it must use its assets to prioritize payments to creditors, wages for employees. work, pay taxes to the state, then the remaining assets are divided among the owners in proportion to their capital contribution.

Classify

Depending on the type of business, equity includes the owner’s investment capital and undistributed profit after tax.

Owner’s investment capital is the capital contributed by the owners (the State, shareholders, joint venture parties, general partners, members of limited companies, …) into the enterprise. For a joint-stock company, the owner’s contributed capital is calculated according to the par value of the issued shares (also known as charter capital).

READ MORE  Things You Need to Know About Npv

The equity premium is the difference between the issue price and the par value of the share. There are cases where the issue price of shares is much higher than par value, making share capital surplus account for a major proportion in the total equity of the company.

For example, on May 17, 2012, Facebook had a very successful initial public offering (IPO) with an issue price of $38/share while par value was $0.000006/share. . With a total of 421.2 million shares issued, Facebook raised more than 16 billion USD and became the second largest IPO on the US stock market.

See also: What is an Observer – Observer in Vietnamese

Undistributed after-tax profit is the accumulated business result that is accumulated and reinvested to increase equity. In the case of a long-term loss of business enterprise, the accumulated loss may exceed the charter capital and lead to delisting.

For example, on September 1, 2017, Truong Thanh Wood Industry Group Joint Stock Company (TTF) announced its reviewed financial statements for the first six months of 2017, in which the Company’s charter capital was VND 1,446 billion. , accumulated loss is 1,418 billion dong as of June 30, 2017.

The auditor of Ernst & Young Vietnam Co., Ltd. has given an exception that the recognition of the loan interest amount of VND 85 billion exempted from bank loans to other income accounts is not consistent with the provisions of law. current regulations.

Therefore, if this exempted interest is not recorded, the profit after corporate income tax for the six-month accounting period will decrease by 85 billion dong, leading to the accumulated loss on the balance sheet as at 30th of December. 6 in 2017 will be 1,503 billion dong, exceeding the charter capital of the Company. At the end of October 2017, TTF explained to the Ho Chi Minh City Stock Exchange the plan to issue 100 million shares, increasing capital by 1,000 billion VND.

READ MORE  Choose the right Indicator

From December 14 to 18, 2017, TTF offered to sell 100 million shares at the price of 10,000 VND/share to 12 strategic investors.

See also: What is an English offer, Sample Letter of Offer in English

On December 25, 2017, TTF announced that it had distributed all 70 million shares, earning 700 billion VND. Thus, TTF has increased its charter capital to VND 2,146 billion, saving TTF from the “judgment” of delisting.

(References: Textbook of Analytical Financial Reporting – Forecasting and Valuation, National Economics University Publishing House)