Finance Formulas / July 11, 2018 / Alia Marquez
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.
Total costs are made up of fixed costs, those costs that are required for production but do not change based on output, and variable costs, those costs that increase or decrease as output increases or decreases. For example, if an organization manufactures desktop computer screens, the glass screens, plastic casings, electrical boards and wires, and screws are all variable costs. The cost of the facility they are made in and the equipment used to assemble the monitors are fixed costs. It doesn't matter if one monitor is made or 100, the cost of the facility and equipment will remain fixed.
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