reply to The two ways in which a company's stockholder's equity is increased is by paid-in capital
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reply to The two ways in which a company's stockholder's equity is increased is by paid-in capital and retained earnings. Cash-in capital, or paid-in capital, is the money that shareholders contribute to a company when they buy shares. This initial investment boosts the company's equity and financial standing. Any additional funds invested by shareholders also increase the company's equity, enhancing the overall value available to shareholders. The excess paid-in capital over the stock's par value is shown in the capital contributions section of the stockholders' equity on the balance sheet. Ultimately, raising cash-in capital has a positive impact on stockholder's equity. Retained earnings reflect the profits or losses a company keeps rather than distributing as dividends. They accumulate over time and significantly impact stockholder's equity. By retaining earnings, a company can strengthen its financial position, invest in growth opportunities, and enhance shareholder value. On the other hand, losses decrease stockholder's equity. Ultimately, retained earnings play a critical role in increasing the net worth available to shareholders.
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach