Total Stockholders’ Equity

Total Stockholders’ Equity

This is the ownership claim of shareholders on total assets and operating profit of the firm. Corporations divide stockholder’s equity into two accounts- capital stock and retained earnings. In the partnership business this is termed as owner’s equity. This is presented in the balance sheet side by side with total assets and total liabilities.

Importance of Shareholders’ Equity

Every organization has a particular capital structure having debt and equity capital. Equity capital comes from shareholders as they show their faith in the firm’s management and board of director’s ability to give return on their money and investment. So, they have the right on the money they invested and the amount of money the organization earns using their investment. Again, firms must keep a balanced capital structure to continuously perform better and improve its performance. More equity capital is an indicator of safety where more debt capital is bit risky for the firm.

Total Liabilities and Total Current Liabilities explained

Total Liabilities

Total liabilities consist of current liabilities and long term liabilities. Current liabilities are the liabilities that the firm is to pay in the current year where long term liabilities like bonds payable, mortgage payable, long-term notes payable, lease liabilities, and pension liabilities those the firm is to pay after one year or after the current financial year. This is presented in the balance sheet side by side with total assets to show exact financial picture of an organization.

Importance of Total Liabilities

Every firm must correctly and precisely calculate its total liabilities to compare those liabilities with assets outstanding currently. This also helps compare total liabilities in previous years and total liabilities of its competitors. This is also an important indicator of future performance of the organization.

Total Current Liabilities

Total current liabilities are the obligations that the organization is to pay within the coming year. Most common forms of current liabilities are accounts payable, wages payable, bank loan payable, interest payable, and taxes payable. Summation of all these current liabilities will be total current liabilities. Current maturities of long-term obligations are also included in the total current liabilities. This is included under total liability of balance sheet.

Importance of Total Current Liabilities

Total current liabilities are used to find out current ratio which helps us to know the company’s ability to pay all the current obligations with the current assets the company currently holds. Having more current liabilities indicate that the firm is not efficient in managing its liabilities properly where the firm must maintain more carefully to sustain in the market. Current ratio facilitates comparison of the firm’s ability to pay current obligations with that of its competitors.

Total Assets and Total Current Assets Defined

Total Assets

Total assets include current assets, long term investments, property, plant and equipment, and intangible assets.

Importance of Total Assets

To show the actual picture of the firm, a firm must keep track of total assets. As this is presented in the balance sheet which is to show the economic strength of the firm to sustain in the market, pay short term obligations and also long term obligation of the firm. So, it is so much important to have a strong base of the firm by having diversified assets in its portfolio of total assets.

Total Current Assets

Current assets are assets that a company expects to convert to cash or use up within one year. Cash, accounts receivables, supplies, short term investments, inventories, pre-paid expenses are some of the common forms of current assets that are presented in the asset section of balance sheet. 

Importance of Total Current Assets

Every organization must keep enough current assets in hand to pay all its short term obligations. If for just a single day, a company fails to maintain that, it has to suffer for longer period of time. Adequate current assets in hand indicate that the firm is being operated as per it needs. Current asset is used to calculate current ratio which helps to make important management decisions by comparing the ratio with other year’s ratios and the current ratios of competitors of the firm.

 

Tax Rate and its Importance

Tax Rate

This is the rate of tax that has been levied by the government on income and other things within the respective government’s jurisdiction. In most of the cases this is percentage of total income in case of individuals and for organizations, it is percentage of net operating income. Tax rate varies from country to country. There are quite a few methods used to mention a tax rate: average, marginal, statutory, effective average, and effective marginal. These rates can also be offered using different descriptions applied to a tax base: exclusive or inclusive.

Importance of tax rate

Tax rate is something very much important to notice over time for both individuals and firms. If the tax rate frequently fluctuates, there might be more risks involved in so many areas of decision making. So, the tax rate in a country is one of the major factors of decision making.