Stockholders Equity Flashcards, test questions and answers
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What is Stockholders Equity?
Stockholders equity is an important source of capital for businesses, as it represents the total ownership interest in a company. It includes common stock, retained earnings, and any other investments or contributions made by shareholders. Stockholders equity helps companies finance their operations and can be used to fund expansions, pay dividends to owners, repurchase shares of stock, and more.Common stock consists of shares owned by investors who have purchased them on the open market. This type of stock usually pays out dividends when profits are earned. Retained earnings represent net income that has been reinvested into the business rather than distributed as dividends to shareholders; they reflect profits accumulated over time from previous periods’ operations. Other investments include additional funds contributed directly from shareholders in exchange for additional voting rights or other benefits.The amount of money available through stockholder’s equity depends on how much a company earns in profits each year and how much it chooses to reinvest back into its operations instead of distributing as dividends to owners. The amount also depends on how much new investment capital is raised via issuing new stocks or bonds or receiving direct contributions from shareholders. If a company does not perform well financially or if investors do not believe in its long-term prospects, then there may be fewer sources (or none at all) of financing through this method. Additionally, some publically traded companies must adhere to certain regulations regarding shareholder’s equity that limit their ability to raise funds through this route alone without passing specific requirements such as shareholder votes etcetera In summary, stockholder’s equity represents the total ownership interests held by individuals within a business entity including common stocks owned by outside investors and internal reinvestment via retained earnings – which provide financial resources for expansion needs but depend heavily upon performance & investor confidence levels in order for those resources remain available.