In 2021, the ape company recorded net profits of $298,000 and dividend payments to $26,000 on common shares. 10,000 shares of the company's cumulative preferred stock, with a $100 par value, are also in circulation. Equity held by common stockholders was $1,200,000 in January 1 and $1,600,000 by December 31, 2021. The business's 2021 return on its common stockholders' equity is 17.0%.
After all liabilities have indeed been paid, a company's residual assets are referred to as its stockholders' equity. This amount is computed by deducting term debt from total assets, or alternatively, by adding share capital and reserves and surplus and deducting treasury stock.
The calculation of stockholders' equity is made up of four factors are shares in circulation, additional paid-in capital, profits, and treasury stock. A firm has sufficient assets to cover its liabilities when stockholders' equity is positive; otherwise, it has more liabilities than assets.
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