Reading: Stocks vs Bonds
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.
Modifié le: mardi 14 août 2018, 10:13