You are a consultant for several emerging, high-growth technology firms that were started locally and have been a part of a business incubator in your area. These firms start out as sole proprietorships but quickly realize the need for more capital and often incorporate. One of the common questions you are asked is about stockholder’s equity. Explain the characteristics and functions of the retained earnings account and how the account is different from contributed capital. a. Contributed capital has been provided directly by the owners; retained earnings has been generated through operations. b. Contributed capital can be returned to owners by way of dividends; retained earnings are permanent. c. Profits increase retained earnings while losses decrease contributed capital. d. Contributed capital represents the par or stated values of issued and outstanding shares; any additional amounts contributed by owners are included in retained earnings.
You are a consultant for several emerging, high-growth technology firms that were started locally and have been a part of a business incubator in your area. These firms start out as sole proprietorships but quickly realize the need for more capital and often incorporate. One of the common questions you are asked is about stockholder’s equity. Explain the characteristics and functions of the retained earnings account and how the account is different from contributed capital. a. Contributed capital has been provided directly by the owners; retained earnings has been generated through operations. b. Contributed capital can be returned to owners by way of dividends; retained earnings are permanent. c. Profits increase retained earnings while losses decrease contributed capital. d. Contributed capital represents the par or stated values of issued and outstanding shares; any additional amounts contributed by owners are included in retained earnings.
You are a consultant for several emerging, high-growth technology firms that were started locally and have been a part of a business incubator in your area. These firms start out as sole proprietorships but quickly realize the need for more capital and often incorporate. One of the common questions you are asked is about stockholder’s equity. Explain the characteristics and functions of the retained earnings account and how the account is different from contributed capital. a. Contributed capital has been provided directly by the owners; retained earnings has been generated through operations. b. Contributed capital can be returned to owners by way of dividends; retained earnings are permanent. c. Profits increase retained earnings while losses decrease contributed capital. d. Contributed capital represents the par or stated values of issued and outstanding shares; any additional amounts contributed by owners are included in retained earnings.
You are a consultant for several emerging, high-growth technology firms that were started locally and have been a part of a business incubator in your area. These firms start out as sole proprietorships but quickly realize the need for more capital and often incorporate. One of the common questions you are asked is about stockholder’s equity. Explain the characteristics and functions of the retained earnings account and how the account is different from contributed capital.
a.
Contributed capital has been provided directly by the owners; retained earnings has been generated through operations.
b.
Contributed capital can be returned to owners by way of dividends; retained earnings are permanent.
c.
Profits increase retained earnings while losses decrease contributed capital.
d.
Contributed capital represents the par or stated values of issued and outstanding shares; any additional amounts contributed by owners are included in retained earnings.
Definition Definition Assets available to stockholders after a company's liabilities are paid off. Stockholders’ equity is also sometimes referred to as owner's equity. A stockholders’ equity or book value generally includes common stock, preferred stock, and retained earnings and is an indicator of a company's financial strength.
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