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From Wikipedia, the free encyclopedia Jump to: navigation, search For equity securities, see Stock. This article needs attention from an expert on the subject. See the talk page for details. WikiProject Business and Economics or the Business and Economics Portal may be able to help recruit an expert. (November 2008) This article includes a list of references, but its sources remain unclear because it has insufficient inline citations. Please help to improve this article by introducing more precise citations. (August 2010)
Accountancy
Key concepts Accountant Accounting period Bookkeeping Cash and accrual basis Cash flow management Chart of accounts Journal Special journals Constant Item Purchasing Power Accounting Cost of goods sold Credit terms Debits and credits Double-entry system Mark-to-market accounting FIFO & LIFO GAAP / IFRS General ledger Goodwill Historical cost Matching principle Revenue recognition Trial balance Fields of accounting Cost Financial Forensic Fund Management Tax Financial statements Statement of financial position Statement of cash flows Statement of changes in equity Statement of comprehensive income Notes MD&A XBRL Auditing Auditor's report Financial audit GAAS / ISA Internal audit SarbanesOxley Act Accounting qualifications CA CPA CCA CGA CMA CAT CFA CIIA ACCA CIA CTP ICAEW CIMA IPA This box: view talk edit In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists.
In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance operations. This creates a liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for the positive remainder is deemed the owner's interest in the business. This definition is helpful in understanding the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital or liable capital.
Contents
1 Equity investments 2 Accounting o 2.1 Book value 3 Shareholders' equity 4 Market value of shares 5 Equity in real estate 6 See also 7 Notes 8 References 9 External links
holdings allow individual investors to obtain the diversification of the fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s). An alternative, which is usually employed by large private investors and pension funds, is to hold shares directly; in the institutional environment many clients who own portfolios have what are called segregated funds, as opposed to or in addition to the pooled mutual fund alternatives. A calculation can be made to assess whether an equity is over or underpriced, compared with a long-term government bond. This is called the Yield Gap or Yield Ratio. It is the ratio of the dividend yield of an equity and that of the long-term bond.
[edit] Accounting
In financial accounting, equity capital is the owners' interest on the assets of the enterprise after deducting all its liabilities.[1] It appears on the balance sheet / statement of financial position,[2] one of the four primary financial statements. Ownership equity includes both tangible and intangible items (such as brand names and reputation / goodwill). Accounts listed under ownership equity include (example):
Share capital (common stock) Preferred stock Capital surplus Retained earnings Treasury stock Stock options Reserve
Changes in the firm's assets relative to its liabilities. For example, a profitable firm receives more cash for its products than the cost at which it produced these goods, and so in the act of making a profit, it is increasing its assets. Depreciation - Equity will decrease, for example, when machinery depreciates, which is registered as a decline in the value of the asset, and on the liabilities side of the firm's balance sheet as a decrease in shareholders' equity. Issue of new equity in which the firm obtains new capital increases the total shareholders' equity. Share repurchases, in which a firm gives back money to its investors, reducing on the asset side its financial assets, and on the liability side the shareholders' equity. For practical purposes (except for its tax consequences), share repurchasing is similar to a dividend payment, as both consist of the firm giving money back to investors. Rather than giving money to all shareholders immediately in the form of a dividend payment, a
share repurchase reduces the number of shares (increases the size of each share) in future income and distributions. Dividends paid out to preferred stock owners are considered an expense to be subtracted from net income[citation needed](from the point of view of the common share owners). Other reasons - Assets and liabilities can change without any effect being measured in the Income Statement under certain circumstances; for example, changes in accounting rules may be applied retroactively. Sometimes assets bought and held in other countries get translated back into the reporting currency at different exchange rates, resulting in a changed value.
Equities, also known as securities are shares of companies traded in the stock exchanges. Investing in equities can help you attain your investment goals faster considering that most conventional investments like fixed deposits, PPF, bonds etc. often yield a lesser interest rate. However, the investment needs to be done cautiously since market conditions may be volatile and it takes great knowledge & skills to spot market opportunities.
Equity (beginning of year) + net income inter net money you gained dividends how much money you gained or lost so far +/ gain/loss from changes to the number of shares outstanding. = Equity (end of year) if you get more money during the year or less or not anything
The notion of equity with respect to real estate comes the equity of redemption. This equity is a property right valued at the difference between the market price of the property and the amount of any mortgage or other encumbrance.
[edit] Notes
1. ^ IFRS Framework quotation: International Accounting Standards Board F.49(c) 2. ^ Financial statements
[edit] References
Graham, Benjamin; Dodd, David L. (1934). Security Analysis: Principles and Technique. New York: McGraw-Hill Book Co. ISBN 0070244960. Hurst, J. M. (1970). The Profit Magic of Stock Transaction Timing. Englewood Cliffs, N.J: Prentice-Hall. ISBN 0137260008. Keynes, John M. (1936). "12". The General Theory of Employment, Interest and Money. London: MacMillan. ISBN 9780230004764. Stein, Benjamin; DeMuth, Phil (2003). Yes, You Can Time the Market!. Hoboken, N.J: J. Wiley. ISBN 0471430161.
Basic financial concepts Equity securities Financial terminology Generally Accepted Accounting Principles Stock market
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