Every business that takes place from its inception and goes into operation requires a certain amount of capital, formed from different sources. The capital structure of a company consists of two types: Debt capital and Equity (or Equity).
Viewing: What is Equity capital
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What does equity include
?4 What does a decrease in equity represent?4.1 How does dividend payment affect equity?
What is Equity
?Owner’s Equity is the portion of the net assets of users, owned by shareholders.
It is the remainder after the time of getting total assets minus liabilities.
Equity, or Equity = Total Assets – Liabilities
Equity of Mobile World Joint Stock Company (MWG)
Distinction: Occupied equity & Charter capital
Charter capital is the amount of capital contributed or committed by a member or shareholder of the company within a certain period of time. This amount of capital is stipulated in the Charter of the company.
on the financial statements, it is shown below the common name Equity.
It is the basis for locating the density of capital contributions of members in the business. Thereby, as a basis for allocating rights, effects and obligations among shareholders.
Charter capital can only be renewed with the consent of shareholders.
For example, whether to raise more capital or not, will have to be discussed in the General Meeting of Shareholders…
Occupied equity is all capital owned by shareholders. Composed of Share capital (charter capital), undistributed arbitrage, & other sources.
Thus, equity has a larger scale than charter capital.
In the image above you will see:
Equity includes what?
You will see the appearance of the occupied equity on the Balance Sheet, under the following forms:
#first. Investment capital expenditure (or capital contribution) of the owner
Is the amount of capital invested and spent by shareholders.
Owner’s contributed capital (or share capital): is the actual amount of capital contributed by shareholders, as stipulated in the company’s charter. According to the law, for JSCs, the amount of contributed capital will be recorded at par value of shares. Share premium: Amount earned by the enterprise from the difference between the issued profit and the par value of the shares.
According to the regulations of the State Securities Commission, each share has a tight and fixed par value of 10,000 VND. Any is shares of VinGroup (VIC), Vinamilk (VNM) or a company that has not been listed on the stock exchange.
The par value of the shares is 10,000 VND, but the trading budget in the market will not be the same.
Suppose, the reference price on the market share of ABC stock is currently 30,000 VND. Business ABC will issue 20,000 shares to the public.
That does not mean that ABC will have to sell shares at 10,000 VND/share, but will sell close to the market price. For example, 30,000 VND.
At that time, the amount ABC collected is: 30,000 x 20,000 = VND 600,000,000.
This amount is distributed as follows:
Amount: 10,000 x 20,000 = 200,000,000 VND. They will be added to the Equity section. At the same time, 20,000 shares will be added to the number of outstanding shares. Remaining amount: 600,000,000 – 200,000,000 = 400,000,000 VND. This is ABC’s equity premium.
#2. Price deviation from business advocacy
Funds: Economic and financial reserve fund, investment fund for reform and development, etc. These funds are set aside by the company to be used for different purposes such as reserve, or for investment activities. pepper. The source is taken from the revenue of the year.
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The rate of setting aside the funds is specified in the Company’s Charter, and does not exceed the density that the labor force.
undistributed profit: residual, undistributed difference.
#1 & #2 are the two sources that account for the maximum proportion in the structure of the owner’s equity.
for example, NT2’s 2017 financial economic report:
The owner’s contributed capital is 2,878 billion VND, accounting for 57.75%. The corresponding number of issued shares is: 287,876,029 shares. Undistributed revenue is 1,969 billion VND, accounting for 39.51%.
#3. Difference between assessment and asset assessment
Asset Reshaping Difference: Reflects the difference caused by a review of a consumer’s existing wealth. Assets that are reshaped are mainly fixed assets, real estate, investment properties, or even inventories… Exchange rate differences: Exchange rate differences often arise in the following cases: actually buying sale, negotiation, payment transaction arising in foreign currency. Comment on monetary items of foreign currency origin; change financial statements from foreign currency to Vietnam Dong.…
#4. Other sources
Treasury shares: the value of shares repurchased by the company. This value includes the share price at the time of acquisition & the aggregate of the associated Budgets.
DQC bought treasury shares in 2017
sources of capital expenditures for capital construction investment, non-business funding sources…
Cost sources #3, #4 account for a relatively small proportion in the organizational structure of equity.
What does a decrease in equity represent?
is a source of customer costs.
Less occupied equity will make your investment less. The crafting model is most likely to be narrow
At that time, in order to maintain manufacturing operations, the company will have to go into debt. High debt will lead to economic and financial imbalance.
As you know…
Every year, the equity occupied will be supplemented by a source of arbitrage from the business movement of consumers.
business will use this profit to reinvest.
However, shareholders will also require the company to deduct a portion of revenue to pay dividends.
How does paying dividends affect equity?
Share means the difference in value after tax divided among shareholders, after the company has set aside funds.
A cash dividend is a company’s use of money, from profits earned, to distribute to shareholders.
Back to NT2, in 2017, the business spent more than 748.4 billion VND to pay cash dividends to shareholders.
The source of payment is obtained from undistributed profits.
let, equity will decrease in proportion to the amount of cash dividends paid out.
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Thus, in addition to bringing direct benefits to shareholders,
… demonstrating good economic skills, the business still has “money” to pay dividends, then…
… cash dividends still have a negative impact. It’s reducing equity, which essentially slows down the steps of reinvesting spending and spreading manufacturing.