3 example for equity

Household Equity: For individuals, equity is determined by ownership of a house and car.

• Non-current assets : fixed asset, an asset that doesnt change for a long time. (equipment)

• Current assets: asset that changes all the tim (cash)

  Derlynn

• Non-current liabilities: long-term debts owed by the business and used within one year (bank loans)

• Current liabilities: short-term debts owed by the business, repaid in less than one year (trade payable)

  Gerald

• Total Equity: the value of company funds left after subtracting total assets from total liabilities.

• E.G: total assets($500000) - total liabilities($400000) = total equity($100000)

• Shareholders equity: the total sum of money invested into the business by the shareholders.

  • 2 ways to invested:

    • Way1: Share capital( money put into the business when shareholders buy newly issued shares)

    • Way2: Reserves( profit and loss reserves = retained profits from current and previous years. This profit is owned by the shareholders but has not been paid out to them in the form of dividends. It is kept in the business as part of the shareholders’ funds.

Answer: In 2017, the business earned less than in 2018. The total assets in 2017 is lower compared to 2018. This is due to the value of assets in 2017 being lower than in 2018. The total liabilities in 2017 is also lower in 2017 compared to 2018 due to the values of liabilities in 2017 being lower.

The working capital for 2017 is higher than the working capital for 2018. This means that the business can pay more short term debts in 2017 than in 2018. The business is earning more in 2018 than in 2017 as the capital is higher in 2018. Total assets and total liabilities in 2018 is higher than in 2017.

Non current assets : Company vehicles, Factory building

Current liabilities : Money owed by customers, amounts owed to suppliers, tax owed to suppliers, tax owed to government

Non current liabilities : Ten year bank loan

Share capital : Ordinary share capital

Reserves : Retained profit

Refer to Ace Machines Ltd’s statement of financial position on page 305.

a Calculate the change in working capital between the two years shown. --> CJ

• $15000 2018: 140 - 130 = 10 2017: 125 - 100 = 25 25 - 10 = 15

b Comment on your result. --> CJ

• The working capital in 2017 is higher than the working capital in 2018

c Which source of finance provided most capital during 2018: loans, share issues or retained profit? Explain your answer. --> Jenni

C answer: From ACE company's statement of financial position, the most capital provided in 2018 is the share issues. Because the shareholder's fund has reach up to $540 000 and from the case study ACE company has sold new shares than the bank loan and retained profit from $300 000 - $340 000. d Do you think that this business should reduce the value of its inventories? Explain your answer. -->Jason

Yes, because reducing inventory values will be a positive opportunity cost in being able to spend money that was supposed to be for inventory to be spent on other assets.

e Do you think the shareholders of Ace Machines Ltd should be pleased with the statement of financial position data? Explain your answer --> Figo

The shareholders should be satisfied as assets are increasing. In 2017, the total assets is $1165000. While in 2018, it increased to $1290000.

X:50+12+8+1=71

Y:71-38=33

Z:90-75=15

b. Darren

-Land

-Equipment

c. Laquisha

-Clay

-Wood

-Wax polish

d. Razihan

HK Co. Ltd.

because because they have much more assets (190000) than Kl. Co. Ltd and also they have more retained profit too (the difference is 2000)