Finance Formulas / April 11, 2018 / Avalynn Orr
Accounting profit uses realized or actual gains and losses and is calculated according to generally accepted accounting principles (GAAP). It is a company's total revenue reduced by the explicit costs of producing goods or services. These explicit costs involve direct monetary movement and include expenses such as the cost of raw materials, employee wages, transportation, rent and interest on capital. Usually, accounting profit is limited to time periods, such as a fiscal quarter or year. Accounting profit computations are primarily used for income tax purposes, financial statement preparations and to review financial performance.
Typical bonds consist of semi-annual payments costing $25 per coupon. Coupons are usually described according to the coupon rate. The yield the coupon bond pays on the date of its issuance is called the coupon rate. The value of the coupon rate may change. Bonds with higher coupon rates are more attractive for investors since they provide higher yields. The coupon rate is calculated by taking the sum of all the coupons paid per year and dividing it with the bond's face value.
Companies fund their capital purchases with equity and borrowed capital. The equity capitalstockholders' equity can also be viewed as a company's net assets (total assets minus total liabilities). Investors contribute their share of (paid-in) capital as stockholders, which is the basic source of total stockholders' equity. The amount of paid-in capital from an investor is a factor in determining hisher ownership percentage.
Stockholders' equity is the amount of the company that is "owned" by investors. A good way to think of stockholders' equity is the amount of money that stockholders would theoretically get if the company decided to close its doors, sell its assets, and pay all of its debts. This includes preferred equity as well as common stockholders' equity.
In Case You Missed It