Question

a investor just brought from my company 65% equity meaning i own only now 35%

for the next 3 yrs

what does this mean when we start getting profits and making descions????

-how much money do i get when we sell an item that cost $35

OR

-do i have say in a companys descion now as when i had full ownership

make up your own

please give a real life scenario as i am still learning!!!

Answer 1

Hi,

I hope you are doing well!

Question:

Answer:

Equity:

Equity is the ownership of any asset after any liabilities associated with the asset are cleared. For example, if you own a car worth $50,000, but you owe $15,000 on that vehicle, the car represents $35,000 equity.

Put simply, equity is ownership of an asset of value. Ownership is created when the owner contributes to the financing of the asset purchase. Another way to finance the asset purchase is with debt. The amount of equity used to purchase an asset is relative to the amount of debt is called the equity position.

It means equity is a right or ownership. This right and ownership of decision taking/making is transfer to the major shareholder.

In your case investor bought the 65% stake in your company for 3 years and now you have 35% stake that means the major shareholding is to have the investor. So, Decision making rights will transfer to the investor in your case.

Because the equity holder or investor has the ownership in the same proportion of its holding. In your case investor and your ownership proportion is 65:35. So, the profit will also distribute in the same proportion.

So, the $35 will distribute in the proportion of 65: 35 that means investor will get $22.75 and you will get $12.25.

Note: Any loss will distribute in the same proportion also.

Thank You