Briefly explain (3–paragraphs) how equity transactions affect the
components of stockholders’...

Question

Briefly explain (3–paragraphs) how equity transactions affect the 
components of stockholders’ equity. For instance, what impact do these 
transactions have on financial ratios, such as EPS (earnings per share)?"Time is money.” We have all heard this cliché at some point. Explain (3– paragraphs) how this 
simple phrase illustrates the time value notion.Provide references!

Robert · Accepted Answer

QUESTION: 
Briefly explain (3–paragraphs) how equity transactions affect the components of stockholders’ 
equity. For instance, what impact do these transactions have on financial ratios, such as EPS 
(earnings per share)?  
SOLUTION: 
The different stockholders’ equity transactions and their affect are explained as follows: 
1. Issuance of Stock: The issuance of the stock by the company either in the form of 
preference stock or equity stock increases the shareholders equity. The balance of 
common stock and preferred stock stated at par value increases and the number of shares 
outstanding also increases. Any additional capital above the par value also increases. This 
will lead to the reduction in earnings per share because the number of shares outstanding 
has increased.
2. Repurchase of Stock: The repurchase of stock is approved by the board of directors. The 
shares are repurchased to return the excessive cash to shareholders so that the same can 
be used in employee stock and incentive plans or just to decrease the number of shares 
outstanding.

Briefly explain (3–paragraphs) how equity transactions affect the components of stockholders’ equity. For instance, what impact do these transactions have on financial ratios, such as EPS (earnings...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment