Equity - Courses for Crammers

You are currently viewing a sample of the Cram Kit. Click here to unlock everything.

Equity is essentially how much the company is worth. It's the value of 100% stake in the company.

Common stock represents stockholder ownership in the company through the purchase of stock.

Account	In relation to a lemonade stand...
Common Stock	Business has been booming, so you issue 100 shares of stock to raise more capital for expansion.

Dividends are when a company pays shareholders back a share of profits.

Account	In relation to a lemonade stand...
Dividends	Out of your profits for the year, you issue $1,000 in dividends to shareholders.

Retained earnings represents the net income kept by a company after they have paid their stockholders dividends.

Account	In relation to a lemonade stand...
Retained Earnings	Out of $10,000 in net income, you issued $1,000 in dividends, leaving you with $9,000 in retained earnings.

Activate AutoScroll