Shareholders Equity

•Shareholders Equity - Shareholders' equity is equal to a firm's total assets minus its total liabilities and is one of the most common financial metrics employed by analysts to determine the financial health of a company. Shareholders' equity represents the net value of a company, or the amount that would be returned to shareholders if all the company's assets were liquidated and all its debts repaid.


Shareholders Equity = Total Assets – Total Liabilities

•Assume company ABC's balance sheet shows $1,600,000 in retained earnings held in cash, $4,00,000 in stocks, and $4.4 million in equipment and other fixed assets. It also shows the following debts or expenses to be paid: $6,000,000 in total liabilities (all in corporate bonds). According to the balance sheet, ABC has $10 million in total assets and $6 million in total liabilities. After subtracting the liabilities from the assets, ABC's shareholders' equity is $4 million.
•Price per Share = $4,00,000 shareholder equity / 10 million shares = $4 per share

Bond Structure

•Company ABC total liabilities are in the form of Corporate Bonds totaling $6MM.
•$6MM Corp Debt = 6,000 Bond Certificates at $1,000
•

              Bond Certificate
                      Company ABC
          Face Value = $1,000
          Coupon = $0

•
•Company ABC will pay the bond holder $1,000 at maturity.
•Assume this is a Zero Coupon bond – Company ABC will not pay interest on the bonds until maturity.
•A coupon payment is a regular payment of interest on a bond.




Last modified: Tuesday, August 14, 2018, 10:13 AM