Question

The stockholders' equity section of the balance sheet typically includes the line items of retained earnings, common stock, treasury stock, and other comprehensive income.

Select two of these line items (common stock and Treasury stock) and explain what their balances might indicate about how Ford Motor Company is utilizing the investment by its stockholders.

In your response, address whether you would want to purchase stock in the company based on your analysis.

Please use a scholarly article for reference.

Answer 1

Stockholders Equity (also referred to as Shareholders Equity) is associate degree account on a company’s record that consists of share capital and preserved earnings. It additionally represents the residual price of assets minus liabilities. By rearranging the initial accounting equation, Assets = Liabilities + Stockholders Equity, it may be expressed as Stockholders Equity = Assets – Liabilities.

Preferred stock, common shares, extra extra, preserved earnings, and treasury shares area unit all rumored on the record within the stockholders' equity section. data concerning the nominal value, capital stock, issued shares, and outstanding shares should be disclosed for every kind of stock. If a corporation has preferred shares, it's listed initial within the stockholders' equity section because of its preference in dividends.

1. preserved Earnings:

Over the lifetime of an organization it's 2 decisions of what to try to to with its internet income: (1) pay it out as dividends to its stockholders, or (2) keep it and use it for business activities. the quantity it keeps is that the balance in a very stockholders' equity account known as preserved Earnings. This leger account could be a real or permanent account with a standard credit balance.

It is vital to grasp that massive|an outsized|an oversized} credit balance in preserved earnings doesn't essentially mean an organization includes a large money balance. to work out the quantity of money, one should cross-check the brokerage account within the current plus section of the record.

2. Common Stock:

If an organization has issued just one sort, or class, of stock it'll be common shares. once associate degree capitalist provides an organization cash reciprocally for half possession, the corporation problems a certificate of possession interest to the shareowner. This certificate is understood as a certificate, capital stock, or stock.

How to obtain a stock ??

Generally stocks area unit bought supported considering the subsequent factors:

a.Earnings Growth

b.Stability

c.Relative strength within the trade

d.debt equity magnitude relation

e.Price earnings magnitude relation

f.Managements

g.Dividents

Shareholder equity helps you price a corporation after you use it to work out value -- virtually, the worth of a corporation written down on the accounting ledger. To calculate value per share, take a company's shareowner equity and divide it by the present variety of shares outstanding. If you then take the stock's current worth and divide by the present value, you've got the price-to-book magnitude relation.

Book value could be a comparatively easy idea. The nearer to value you'll be able to obtain one thing at, the higher it's. Book value, however, includes a heap of skeptics lately. betting on what tax consequences area unit being avoided, most firms will exercise some latitude in valuing their inventory and in reportage inflation or deflation on their land. however with monetary firms like banks, consumer-loan considerations, brokerages and mastercard firms, the value remains extraordinarily relevant. for example, within the banking system, takeovers area unit usually priced supported value.

please upvote ,comment incase any doubt , feel free to comment ,thank you