How can a company build or increase equity?
Equity is a component of the balance sheet. For owners and investors of a company, the goal is to increase equity, with the primary driver being net income. Each year, net income is reclassified into retained earnings, which is part of equity.
The visual below outlines common items that increase equity on the balance sheet:
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How to calculate the debt to equity ratio?
The debt-to-equity ratio is indicative of the degree of financial leverage used. It essentially is used to determine how much debt has been used to finance its assets value relative to the value of shareholders’ equity. The debt-to-equity ratio is used to indicate the degree of protection to creditors in the case of insolvency. For […]