FA3 Lesson 3. Shareholders’ Equity. Definitions Issuance of share capital Retirement of share capital Treasury stock Dividends Stock dividends and stock splits Cash flow statement considerations. 1. Definitions. Equity (or net assets )
Equity (or net assets)
Ownership interests in the assets of a profit oriented enterprise after deducting its liabilities
Represent residual ownership interest in the company
Have some priority regarding dividends and/or assets upon dissolution
Issued share capital
Shares that have been issued by the company
Outstanding share capital
Shares that are in the hands of investors; this may differ from issued share capital if the company is holding treasury stock (i. e., holding its own shares).
“Gains” or “losses” on retirement of shares (difference between reacquisition cost paid for retired shares and book value) do not flow through the income statement:
Treasury stock are issued shares of the company that have been repurchased and temporarily held by the company for: eventual retirement, distribution to company employees.
Dividends are distributions of cash (usually) or other assets to shareholders.