Share capital: Difference between revisions

Content deleted Content added

Inline

Latest revision as of 15:32, 27 October 2024

A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. Share capital may also denote the number and types of shares that compose a corporation's share structure.

Definition

In accounting, the share capital of a corporation is the nominal value of issued shares (that is, the sum of their par values, sometimes indicated on share certificates). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called share premium, additional paid-in capital or paid-in capital in excess of par).^{[citation needed]}

This equation shows the constituents that make up a company's real share capital:

\sum {\text{Share capital = Number of shares issued}}\times {\text{(Par value + Share premium)}}

This is differentiated from share capital in the accounting sense, as it presents nominal share capital and does not take the premium value of shares into account, which instead is reported as additional paid-in capital.^[1]

Legal capital

Legal capital is a concept used in European corporate and foundation law, United Kingdom company law, and various other corporate law jurisdictions to refer to the sum of assets contributed to a company by shareholders when they are issued shares.^[2] The law often requires that this capital is maintained, and that dividends are not paid when a company is not showing a profit above the level of historically recorded legal capital.^[2]

References

^ "Share Premium Account". Corporate Finance Institute. December 13, 2022. Retrieved August 13, 2023.
^ ^a ^b Thakur, Madhuri (August 29, 2020). Vaidya, Dheeraj (ed.). "Legal Capital". WallStreetMojo.com. CFA Institute. Retrieved May 12, 2022.

[1] "Share Premium Account". Corporate Finance Institute. December 13, 2022. Retrieved August 13, 2023.

[WSM-2] Thakur, Madhuri (August 29, 2020). Vaidya, Dheeraj (ed.). "Legal Capital". WallStreetMojo.com. CFA Institute. Retrieved May 12, 2022.

[1]

[2]

@@ Line 1: / Line 1: @@
 {{Short description|Portion of a company's equity}}
+{{Use American English|date=December 2023}}
+{{Use mdy dates|date=December 2023}}
 {{More citations needed|date=May 2022}}
+[[File:Boston American League Base-Ball Club 1911.jpg|thumb|Share certificate of the Boston American League Base-Ball Club shows a capital [[stock]] of 100 000$]]
-A [[corporation]]'s '''share capital''', commonly referred to as '''capital [[stock]]''' in the United States, is the portion of a corporation's [[Shareholders' equity|equity]] that has been derived by the issue of [[Share (finance)|shares]] in the corporation to a shareholder, usually for [[cash]]. "Share capital" may also denote the number and types of shares that compose a corporation's share structure.
+A [[corporation]]'s '''share capital''', commonly referred to as '''capital stock''' in the United States, is the portion of a corporation's [[Shareholders' equity|equity]] that has been derived by the issue of [[Share (finance)|shares]] in the corporation to a shareholder, usually for [[cash]]. ''Share capital'' may also denote the number and types of shares that compose a corporation's share structure.
 ==Definition==
-In [[accounting]], the share capital of a corporation is the nominal value of [[issued shares]] (that is, the sum of their [[par value]]s, sometimes indicated on share certificates). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called [[share premium]], additional paid-in capital or paid-in capital in excess of par). Commonly, the share capital is the total of the nominal share capital and the premium share capital. Most jurisdictions do not allow a company to issue shares below par value, but if permitted they are said to be issued at a discount or part-paid.
+In [[accounting]], the share capital of a corporation is the nominal value of [[issued shares]] (that is, the sum of their [[par value]]s, sometimes indicated on share certificates). If the allocation price of shares is greater than the par value, as in a rights issue, the shares are said to be sold at a premium (variously called [[share premium]], additional paid-in capital or paid-in capital in excess of par).{{Citation needed|date=December 2023}}
+This equation shows the constituents that make up a company's real share capital:
-<math>\text{Total share capital = Number of shares issued} \times \text{Par value of shares + Paid-in capital}</math>
+: <math>\sum\text{Share capital = Number of shares issued} \times \text{(Par value + Share premium)}</math>
+This is differentiated from share capital in the accounting sense, as it presents nominal share capital and does not take the premium value of shares into account, which instead is reported as additional paid-in capital.<ref>{{cite web |title=Share Premium Account |url=https://corporatefinanceinstitute.com/resources/wealth-management/share-premium-account/ |publisher=Corporate Finance Institute |date=December 13, 2022 |access-date=August 13, 2023 }}</ref>
 ==Legal capital==
-'''Legal capital''' is a concept used in [[European corporate and foundation law]], [[United Kingdom company law]], and various other [[corporate law]] jurisdictions to refer to the sum of assets contributed to a company by shareholders when they are issued shares.<ref name="WSM">{{cite web |last=Thakur |first=Madhuri |editor-last=Vaidya |editor-first=Dheeraj |title=Legal Capital |url=https://www.wallstreetmojo.com/legal-capital/ |website=WallStreetMojo.com |date=29 August 2020 |publisher=CFA Institute |access-date=2022-05-12 }}</ref> The law often requires that this capital is maintained, and that dividends are not paid when a company is not showing a profit above the level of historically recorded legal capital.<ref name="WSM" />
+'''Legal capital''' is a concept used in [[European corporate and foundation law]], [[United Kingdom company law]], and various other [[corporate law]] jurisdictions to refer to the sum of assets contributed to a company by shareholders when they are issued shares.<ref name="WSM">{{cite web |last=Thakur |first=Madhuri |editor-last=Vaidya |editor-first=Dheeraj |date=August 29, 2020 |title=Legal Capital |url=https://www.wallstreetmojo.com/legal-capital/ |website=WallStreetMojo.com |publisher=CFA Institute |access-date=May 12, 2022 }}</ref> The law often requires that this capital is maintained, and that dividends are not paid when a company is not showing a profit above the level of historically recorded legal capital.<ref name="WSM" />
 ==See also==
@@ Line 17: / Line 23: @@
 * [[Capital impairment]]
 * [[Market capitalization]]
-* [[Paid in capital]]
+* [[Paid-in capital]]
 * [[Share dilution]]
 * [[Share premium account]]
@@ Line 28: / Line 34: @@
 {{Authority control}}
-[[Category:Corporate law]]
 [[Category:Capital management]]
+[[Category:Corporate law]]

v t e Financial markets
Types of markets	Primary market Secondary market Third market Fourth market
Types of stocks	Common stock Golden share Preferred stock Restricted stock Tracking stock
Share capital	Authorised capital Issued shares Shares outstanding Treasury stock
Participants	Broker Floor broker Inter-dealer broker Broker-dealer Market maker Trader Floor trader Proprietary trader Quantitative analyst Investor Hedger Speculator Arbitrager Scalper Regulator
Trading venues	Exchange List of stock exchanges Trading hours Over-the-counter (off-exchange) Alternative trading system (ATS) Multilateral trading facility (MTF) Electronic communication network (ECN) Direct market access (DMA) Straight-through processing (STP) Dark pool (private exchange) Crossing network Liquidity aggregator
Stock valuation	Alpha Arbitrage pricing theory (APT) Beta Buffett indicator (Cap-to-GDP) Book value (BV) Capital asset pricing model (CAPM) Capital market line (CML) Dividend discount model (DDM) Dividend yield Earnings yield EV/EBITDA Fed model Net asset value (NAV) Security characteristic line Security market line (SML) T-model
Trading theories and strategies	Algorithmic trading Buy and hold Contrarian investing Dollar cost averaging Efficient-market hypothesis (EMH) Fundamental analysis Growth stock Market timing Modern portfolio theory (MPT) Momentum investing Mosaic theory Pairs trade Post-modern portfolio theory (PMPT) Random walk hypothesis (RMH) Sector rotation Style investing Swing trading Technical analysis Trend following Value averaging Value investing
Related terms	Bid–ask spread Block trade Cross listing Dividend Dual-listed company DuPont analysis Efficient frontier Financial law Flight-to-quality Government bond Greenspan put Haircut Initial public offering (IPO) Long Mandatory offer Margin Market anomaly Market capitalization Market depth Market manipulation Market trend Mean reversion Momentum Open outcry Order book Position Public float Public offering Rally Returns-based style analysis Reverse stock split Share repurchase Short selling Short squeeze Slippage Speculation Squeeze-out Stock dilution Stock exchange Stock market index Stock split Stock swap Trade Tender offer Uptick rule Volatility Voting interest Yield

Authority control databases
National	Germany United States France BnF data Spain Israel
Other	Encyclopedia of Modern Ukraine