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Why the increased use of debt increases the financial risk of the equity shareholder and hence the cost of equity increases?
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How do you calculate equity turnover?
shareholder equity / total assets
The primary objective of financial accounting is?
increases in equity from a company's earning activities are
Are owner's equity accounts increased by debits?
Owners Equity accounts are increased by a credit. If you look at the accounting equation you will see the logic Assets = Liabilities + Owners Equity You can't add a debit + credit. So Owners Equity Increases with a credit.
How do you calculate owner equity when assets increase by 150000 and liabilities increased by 90000?
In financial accounting, Assets always equal the sum of your liabilities and equity. Therefore, if your assets increase by $150k and liabilities increased by $90k, your owners equity must have increased by $60k.
Is shareholders fund the same as shareholder equity?
yes
What are the components of equity?
a) Shareholder's Equity = Share Capital + Retained Earnings - Treasury Shares or b) Shareholder's Equity = Assets - Liabilities
What is the difference between a direct equity claim and an indirect equity claim?
A direct equity claim is an owner's and shareholder's right to profits. An indirect equity claim is a shareholder's right to compensation due to damages received by the company the shareholder owns shares with.
How do you calculate equity turnover?
shareholder equity / total assets
The primary objective of financial accounting is?
increases in equity from a company's earning activities are
Are owner's equity accounts increased by debits?
Owners Equity accounts are increased by a credit. If you look at the accounting equation you will see the logic Assets = Liabilities + Owners Equity You can't add a debit + credit. So Owners Equity Increases with a credit.
How do you figure out the degree of financial leverage at a company?
Leverage is the amount of debt relative to shareholder capital, or equity. So a company with 3 times as much debt as equity is three times leveraged.
How do you calculate owner equity when assets increase by 150000 and liabilities increased by 90000?
In financial accounting, Assets always equal the sum of your liabilities and equity. Therefore, if your assets increase by $150k and liabilities increased by $90k, your owners equity must have increased by $60k.
Is shareholders fund the same as shareholder equity?
yes
Are shareholders' loans equity or debt?
Shareholder loans are debt
Treasury stock is classified as?
Treasury stock is a contra-equity account. It reduces shareholder's equity to its true value.
When we calculate the balance sheet its called?
Assets = Liabilities + Shareholder equity
What happens to the costs of debt and equity when leverage increases?
Key Points If value is added from financial leveraging then the associated risk will not have a negative effect.At an ideal level of financial leverage, a company's return on equity increases because the use of leverage increases stock volatility, increasing its level of risk which in turn increases returns.If earnings before interest and taxes are greater than the cost of financial leverage than the increased risk of leverage will be worthwhile. Terms solvency The state of having enough funds or liquid assets to pay all of one's debts; the state of being solvent. liquidity Availability of cash over short term: ability to service short-term debt.
