Question

1. What is Stockholder Equity? Include Retained Earnings and Common Stock explanations. What is Free Cash Flow?What is Capital Gains Tax? What is the current rate?What are Corporate Tax Rates? What tax rates do individuals pay on Dividends?What is a loan amortization schedule, and what are some ways these schedules are used?

Answer 1

Answer:

Stockholders Equity:

Stockholders' equity is the amount of assets remaining in a business after all liabilities have been settled. It is calculated as the capital given to a business by its shareholders, plus donated capital and earnings generated by the operation of the business, less any dividends issued

Formula:- Assets- Liabilities or Contributed Capital - Retained Earnings

Retained earnings-

Retained earnings are the profits that a company has earned to date, less any dividends or other distributions paid to investors. This amount is adjusted whenever there is an entry to the accounting records that impacts a revenue or expense account

Positive profits give a lot of room to the business owner(s) or the company management to utilize the surplus money earned. Often this profit is paid out to shareholders, but it can also be re-invested back into the company for growth purposes. The money not paid to shareholders counts as retained earnings.

Retained Earnings Formula and Calculation

​RE=BP+Net Income (or Loss)−C−S

Where

:BP=Beginning Period RE

C=Cash dividends

S=Stock dividends​

Common stock

Common stock is a security that represents ownership in a corporation. Holders of common stock elect the board of directors and vote on corporate policies. This form of equity ownership typically yields higher rates of return long term. However, in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders, and other debtholders are paid in full. Common stock is reported in the stockholder's equity section of a company's balance sheet.

key points

• Common stock is a security that represents ownership in a corporation.
• In a liquidation, common stockholders receive whatever assets remain after creditors, bondholders, and preferred stockholders are paid.
• There are different varieties of stocks traded in the market. For example, value stocks are stocks that are lower in price in relation to their fundamentals. Growth stocks are companies that tend to increase in value due to growing earnings.
• Investors should diversify their portfolio by putting money into different securities based on their appetite for risk.

Free cash flow

Free cash flow is the cash a company produces through its operations, less the cost of expenditures on assets. In other words, free cash flow (FCF) is the cash left over after a company pays for its operating expenses and capital expenditures, also known as CAPEX

Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the non-cash expenses of the income statement and includes spending on equipment and assets as well as changes in working capital from the balance sheet.

Interest payments are excluded from the generally accepted definition of free cash flow. Investment bankers and analysts who need to evaluate a company’s expected performance with different capital structures will use variations of free cash flow like free cash flow for the firm and free cash flow to equity, which are adjusted for interest payments and borrowings.

Similar to sales and earnings, free cash flow is often evaluated on a per share basis to evaluate the effect of dilution.

Key points

• Free cash flow (FCF) represents the cash available to creditors and investors in a company, after accounting for all operational expenses and investments in capital.
• FCF reconciles net income by adjusting for non-cash expenses, changes in working capital, and capital expenditures (CAPEX).
• As a measure of profitability, FCF is more subject to fluctuations than net income.
• However, as a supplemental tool for analysis, FCF can reveal problems in the fundamentals before they arise on the income statement.

Capital gain tax

apital gains tax is a levy assessed on the positive difference between the sale price of the asset and its original purchase price. Long-term capital gains tax is a levy on the profits from the sale of assets held for more than a year. The rates are 0%, 15%, or 20%, depending on your tax bracket. Short-term capital gains tax applies to assets held for a year or less, and is taxed as ordinary income

Capital gains can be reduced by deducting the capital losses that occur when a taxable asset is sold for less than the original purchase price. The total of capital gains minus any capital losses is known as the "net capital gains

Tax on capital gains is triggered only when an asset is sold, or "realized." Stock shares that appreciate every year will not be taxed for capital gains until they are sold, no matter how long you happen to hold them.

long-term capital gains tax rate	Your income
* Short-term capital gains are taxed as ordinary income according to federal income tax brackets.
0%	$0 to $39,375
15%	$39,376 to $434,550
20%	$434,551 or more

Current rate Method:

What Is the Current Rate

The current rate method is a method of foreign currency translation where most items in the financial statements are translated at the current exchange rate. When a company has operations in other countries, it may need to exchange the foreign currency earned by those foreign operations into the currency used when preparing the company's financial statements — the presentation currency.

The current rate method is utilized in instances where the subsidiary isn't well integrated with the parent company, and the local currency where the subsidiary operates is the same as its functional currency.

Corporate Tax rate:

A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels

Currently, the federal corporate tax rate is set at 21%. Prior to the Tax Cuts and Jobs Act of 2017, the tax rate was 35%. The corporate tax rate applies to your business's taxable income, which is your revenue minus expenses

What tax rates do individuals pay on Dividends:

Ordinary dividends and qualified dividends each have different tax rates:

• Ordinary dividends are taxed as ordinary income.
• Qualified dividends are taxed at a 20%, 15%, or a 0% rate, under current law. For more information, see capital gains

What is a loan amortization schedule:

An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and the amount of interest that comprise each payment until the loan is paid off at the end of its term

An amortization table is a schedule that lists each monthly payment in a loan as well as how much of each payment goes to interest and how much to the principal. Amortization tables help you understand how a loan works, and they can help you predict your outstanding balance or interest cost at any point in the future.

what are some ways these schedules are used:

here are different methods used to develop an amortization schedule. These include:

• Straight line (linear)
• Declining balance
• Annuity
• Bullet (all at once)
• Balloon (amortization payments and large end payment)
• Increasing balance (negative amortization)

Amortization schedules run in chronological order. The first payment is assumed to take place one full payment period after the loan was taken out, not on the first day (the origination date) of the loan. The last payment completely pays off the remainder of the loan. Often, the last payment will be a slightly different amount than all earlier payments.

In addition to breaking down each payment into interest and principal portions, an amortization schedule also indicates interest paid to date, principal paid to date, and the remaining principal balance on each payment date.

his amortization schedule is based on the following assumptions:

First, it should be known that rounding errors occur and, depending on how the lender accumulates these errors, the blended payment (principal plus interest) may vary slightly some months to keep these errors from accumulating; or, the accumulated errors are adjusted for at the end of each year or at the final loan payment.

There are a few crucial points worth noting when mortgaging a home with an amortized loan. First, there is substantial disparate allocation of the monthly payments toward the interest, especially during the first 18 years of a 30-year mortgage. In the example below, payment 1 allocates about 80-90% of the total payment towards interest and only $67.09 (or 10-20%) toward the principal balance. The exact percentage allocated towards payment of the principal depends on the interest rate. Not until payment 257 or over two thirds through the term does the payment allocation towards principal and interest even out and subsequently tip the majority toward the former.

For a fully amortizing loan, with a fixed (i.e., non-variable) interest rate, the payment remains the same throughout the term, regardless of principal balance owed. For example, the payment on the above scenario will remain $733.76 regardless of whether the outstanding (unpaid) principal balance is $100,000 or $50,000. Paying down more than the monthly contractual amount reduces the amount outstanding and thus the interest that is payable to the lender; if the contractual monthly payment stays the same, the number of payments and the term of the loan must decrease. Conversely, paying down less than the monthly contractual amount increases the amount outstanding and thus the interest payable (negative amortization); if the contractual monthly payment stays the same, the number of payments and the term of the loan must increase.